Tuesday, Craig-Hallum initiated coverage on Orion Marine Group (NYSE:ORN) with a Buy rating and a price target of $14.00. The firm believes that the stock is currently undervalued, citing its trading at less than five times its projected calendar year 2025 enterprise value to EBITDA (EV/EBITDA) ratio. This valuation is seen as particularly low given the significant improvements the company is undergoing, the persistent positive market conditions, and the valuation levels of similar companies.
The analyst pointed out that recent insider purchases by management indicate their confidence in the company's value and prospects. These transactions are often viewed as a positive signal about a company's future performance from those with in-depth knowledge of its operations.
Craig-Hallum's coverage suggests that using both current and 10-year historical company valuation multiples of eight times EBITDA, there is a potential for Orion Marine Group's stock to reach a value of $25. This represents a significant increase from the current price target and reflects the firm's optimistic outlook on the stock's growth potential.
Additionally, the analyst highlighted Orion's substantial net operating losses (NOLs), which amount to over $170 million, or approximately $5 per share. These NOLs can provide a tax advantage, as they may be used to offset future taxable income, thereby potentially improving the company's net earnings.
The new coverage and price target by Craig-Hallum suggest a bullish stance on Orion Marine Group, with the firm's analysis providing a detailed rationale for the optimistic valuation of the company's shares.
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