Orion Engineered Carbons SA – Value Analysis (NYSE:OEC) : December 7, 2016

Capitalcube gives Orion Engineered Carbons SA a score of 41.

Our analysis is based on comparing Orion Engineered Carbons SA with the following peers – Methanex Corporation, Calgon Carbon Corporation, Balchem Corporation and Canexus Corporation (MEOH-US, CCC-US, BCPC-US and CXUSF-US).

Investment Outlook

Orion Engineered Carbons SA has a fundamental score of 41 and has a relative valuation of UNDERVALUED.

Fundamental Score

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Company Overview

  • With respect to peers, relative outperformance over the last year is in contrast to the more recent underperformance.
  • Orion Engineered Carbons SA currently trades at a higher Price/Book ratio (22.04) than its peer median (3.71).
  • OEC-US‘s operating performance is relatively good compared to its peers. The market currently does not expect high earnings growth relative to its peers but seems to expect the company to maintain its relatively high rates of return.
  • OEC-US‘s median net profit margins and relatively high asset efficiency give it some operating leverage.
  • Changes in annual earnings (relative to peers) are better than the change in its revenues (relative to peers), implying the company is focused more on earnings.
  • OEC-US‘s return on assets has improved from below median to about median among its peers over the last five years.
  • The company’s margins are around the peer medians and do not suggest any benefit from a pricing or an operating cost advantage versus peers.
  • While OEC-US‘s revenues growth has been below the peer median in the last few years, the market still gives the stock a P/E ratio that is around peer median and seems to see the company as a long-term strategic bet.
  • The company’s relatively low level of capital investment and below peer median returns on capital suggest that the company is in maintenance mode.
  • OEC-US seems to be constrained by the current level of debt.

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Leverage & Liquidity

OEC-US is debt-constrained.

  • With debt at a relatively high 39.31% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 32.91%), and interest coverage level of 3.17x, OEC-US seems debt-constrained.
  • All 4 peers for the company have an outstanding debt balance.

OEC-US has moved to a Some Capacity from a relatively high leverage profile at the recent year-end.

  • OEC-US‘s interest coverage is its highest relative to the last five years and compares to a low of 1.01x in 2013.
  • Compared to 2015, interest coverage has remained relatively stable for both the company (3.17x) and the peer median (3.17x).
  • OEC-US‘s debt-EV is its lowest relative to the last five years and compares to a high of 51.12% in 2015.
  • The decrease in its debt-EV to 39.31% from 51.12% (in 2015) was also accompanied by a decrease in its peer median during this period to 32.91% from 36.01%.
  • Relative to peers, debt-EV fell 8.71 percentage points.

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Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Methanex Corporation 32.91 1.69 -0.64 11.61
Calgon Carbon Corporation 13.49 4.2 30.27 71.09
Balchem Corporation 10.94 2.34 12.83 33.89
Canexus Corporation 68.53 2.41 1.28 9.74
Orion Engineered Carbons SA 39.31 1.95 3.17 20.87
Peer Median 32.91 2.34 3.17 20.87
Best In Class 10.94 4.2 30.27 71.09

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Company Profile

Orion Engineered Carbons SA supplies carbon black. Its carbon black is used as a performance additive in coatings, polymers, printing and special applications, and in the reinforcement of rubber in tires and mechanical rubber goods. The company’s Gas Blacks, Furnace Blacks and Specialty Carbon Blacks tint, colorize and enhance the performance of plastics, paints and coatings, inks and toners, adhesives and sealants, tires, and manufactured rubber goods, such as automotive belts and hoses. It operates through two reportable segments: Rubber Carbon Black and Specialty Carbon Black. Orion Engineered Carbons was founded on April 13, 2011 and is headquartered in Luxembourg.


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