Intrinsic value of Dorchester Minerals - DMLP

Previous Close

$16.75

  Intrinsic Value

$2.70

stock screener

  Rating & Target

str. sell

-84%

Previous close

$16.75

 
Intrinsic value

$2.70

 
Up/down potential

-84%

 
Rating

str. sell

We calculate the intrinsic value of DMLP stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  18.75
  9.10
  8.69
  8.32
  7.99
  7.69
  7.42
  7.18
  6.96
  6.76
  6.59
  6.43
  6.29
  6.16
  6.04
  5.94
  5.84
  5.76
  5.68
  5.62
  5.55
  5.50
  5.45
  5.40
  5.36
  5.33
  5.29
  5.26
  5.24
  5.21
  5.19
Revenue, $m
  38
  41
  45
  49
  53
  57
  61
  65
  70
  75
  80
  85
  90
  96
  101
  107
  114
  120
  127
  134
  142
  149
  157
  166
  175
  184
  194
  204
  215
  226
  238
Variable operating expenses, $m
 
  25
  27
  30
  32
  34
  37
  40
  42
  45
  48
  51
  54
  58
  61
  65
  69
  73
  77
  81
  86
  90
  95
  100
  106
  111
  117
  123
  130
  137
  144
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  17
  25
  27
  30
  32
  34
  37
  40
  42
  45
  48
  51
  54
  58
  61
  65
  69
  73
  77
  81
  86
  90
  95
  100
  106
  111
  117
  123
  130
  137
  144
Operating income, $m
  21
  16
  18
  19
  21
  22
  24
  26
  28
  29
  31
  33
  36
  38
  40
  42
  45
  47
  50
  53
  56
  59
  62
  66
  69
  73
  77
  81
  85
  89
  94
EBITDA, $m
  30
  26
  28
  31
  33
  36
  38
  41
  44
  47
  50
  53
  57
  60
  64
  68
  72
  76
  80
  85
  89
  94
  99
  105
  110
  116
  122
  129
  136
  143
  150
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Earnings before tax, $m
  21
  16
  18
  19
  21
  22
  24
  26
  28
  29
  31
  33
  36
  38
  40
  42
  45
  47
  50
  53
  56
  59
  62
  66
  69
  73
  77
  81
  85
  89
  94
Tax expense, $m
  0
  4
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  10
  10
  11
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
Net income, $m
  21
  12
  13
  14
  15
  16
  18
  19
  20
  22
  23
  24
  26
  28
  29
  31
  33
  35
  37
  39
  41
  43
  45
  48
  50
  53
  56
  59
  62
  65
  69

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  8
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  67
  64
  70
  76
  82
  88
  95
  101
  109
  116
  124
  131
  140
  148
  157
  167
  176
  187
  197
  208
  220
  232
  244
  258
  272
  286
  301
  317
  334
  351
  369
Adjusted assets (=assets-cash), $m
  59
  64
  70
  76
  82
  88
  95
  101
  109
  116
  124
  131
  140
  148
  157
  167
  176
  187
  197
  208
  220
  232
  244
  258
  272
  286
  301
  317
  334
  351
  369
Revenue / Adjusted assets
  0.644
  0.641
  0.643
  0.645
  0.646
  0.648
  0.642
  0.644
  0.642
  0.647
  0.645
  0.649
  0.643
  0.649
  0.643
  0.641
  0.648
  0.642
  0.645
  0.644
  0.645
  0.642
  0.643
  0.643
  0.643
  0.643
  0.645
  0.644
  0.644
  0.644
  0.645
Average production assets, $m
  57
  62
  67
  73
  78
  84
  91
  97
  104
  111
  118
  126
  134
  142
  151
  160
  169
  179
  189
  199
  210
  222
  234
  247
  260
  274
  288
  304
  319
  336
  354
Working capital, $m
  15
  8
  8
  9
  10
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
  29
  31
  32
  34
  36
  38
  40
  42
  44
Total debt, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total liabilities, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total equity, $m
  67
  64
  70
  76
  82
  88
  95
  101
  109
  116
  124
  131
  140
  148
  157
  167
  176
  187
  197
  208
  220
  232
  244
  258
  272
  286
  301
  317
  334
  351
  369
Total liabilities and equity, $m
  67
  64
  70
  76
  82
  88
  95
  101
  109
  116
  124
  131
  140
  148
  157
  167
  176
  187
  197
  208
  220
  232
  244
  258
  272
  286
  301
  317
  334
  351
  369
Debt-to-equity ratio
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
Adjusted equity ratio
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  21
  12
  13
  14
  15
  16
  18
  19
  20
  22
  23
  24
  26
  28
  29
  31
  33
  35
  37
  39
  41
  43
  45
  48
  50
  53
  56
  59
  62
  65
  69
Depreciation, amort., depletion, $m
  9
  10
  11
  12
  12
  13
  14
  15
  16
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  32
  33
  35
  37
  39
  41
  43
  46
  48
  51
  53
  56
Funds from operations, $m
  27
  22
  24
  26
  28
  30
  32
  34
  37
  39
  42
  44
  47
  50
  53
  56
  60
  63
  67
  70
  74
  78
  83
  87
  92
  97
  102
  107
  113
  119
  125
Change in working capital, $m
  -1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
Cash from operations, $m
  28
  21
  23
  25
  27
  29
  31
  33
  36
  38
  41
  43
  46
  49
  52
  55
  58
  62
  65
  69
  73
  77
  81
  85
  90
  95
  100
  105
  111
  116
  123
Maintenance CAPEX, $m
  0
  -9
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -27
  -28
  -30
  -32
  -33
  -35
  -37
  -39
  -41
  -43
  -46
  -48
  -51
  -53
New CAPEX, $m
  0
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -17
  -17
Cash from investing activities, $m
  0
  -14
  -15
  -17
  -18
  -18
  -19
  -21
  -22
  -23
  -25
  -27
  -28
  -29
  -32
  -33
  -34
  -37
  -38
  -41
  -43
  -45
  -47
  -50
  -52
  -55
  -57
  -61
  -64
  -68
  -70
Free cash flow, $m
  28
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  20
  21
  22
  24
  25
  27
  28
  30
  32
  34
  36
  38
  40
  42
  44
  47
  49
  52
Issuance/(repayment) of debt, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total cash flow (excl. dividends), $m
  28
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  20
  21
  22
  24
  25
  27
  28
  30
  32
  34
  36
  38
  40
  42
  44
  47
  49
  52
Retained Cash Flow (-), $m
  6
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -17
  -17
  -18
Prev. year cash balance distribution, $m
 
  8
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  10
  2
  3
  4
  4
  5
  6
  7
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  19
  20
  21
  22
  24
  25
  27
  28
  30
  32
  33
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  9
  2
  2
  3
  3
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  3
  3
  3
  2
  2
  2
  1
  1
  1
  1
  1
  0
  0
  0
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Dorchester Minerals, L.P. is a limited partnership company. The Company is engaged in the acquisition, ownership and administration of Royalty Properties and net profits interests (NPIs). As of December 31, 2016, the Royalty Properties consisted of producing and nonproducing mineral, royalty, overriding royalty, net profits and leasehold interests located in 574 counties and parishes in 25 states. The NPIs represent net profits overriding royalty interests in various properties owned by the Company. As of December 31, 2016, the Company had completed 270 wells on its Royalty Properties in seven states, and 39 new wells completed on its Properties in three states. The Company owns both a royalty interest and a net profits interest. The Company's general partner is Dorchester Minerals Management LP.

FINANCIAL RATIOS  of  Dorchester Minerals (DMLP)

Valuation Ratios
P/E Ratio 24.5
Price to Sales 13.5
Price to Book 7.7
Price to Tangible Book
Price to Cash Flow 18.4
Price to Free Cash Flow 18.4
Growth Rates
Sales Growth Rate 18.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 29.8%
Ret/ On Assets - 3 Yr. Avg. 29.2%
Return On Total Capital 30%
Ret/ On T. Cap. - 3 Yr. Avg. 29.5%
Return On Equity 30%
Return On Equity - 3 Yr. Avg. 29.5%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 89.5%
Gross Margin - 3 Yr. Avg. 89.8%
EBITDA Margin 78.9%
EBITDA Margin - 3 Yr. Avg. 78.5%
Operating Margin 55.3%
Oper. Margin - 3 Yr. Avg. 54.5%
Pre-Tax Margin 55.3%
Pre-Tax Margin - 3 Yr. Avg. 55%
Net Profit Margin 55.3%
Net Profit Margin - 3 Yr. Avg. 55%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 128.6%

DMLP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DMLP stock intrinsic value calculation we used $38 million for the last fiscal year's total revenue generated by Dorchester Minerals. The default revenue input number comes from 2016 income statement of Dorchester Minerals. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our DMLP stock valuation model: a) initial revenue growth rate of 9.1% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for DMLP is calculated based on our internal credit rating of Dorchester Minerals, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Dorchester Minerals.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of DMLP stock the variable cost ratio is equal to 60.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for DMLP stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Dorchester Minerals.

Corporate tax rate of 27% is the nominal tax rate for Dorchester Minerals. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the DMLP stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for DMLP are equal to 148.7%.

Life of production assets of 6.3 years is the average useful life of capital assets used in Dorchester Minerals operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for DMLP is equal to 18.4%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $67 million for Dorchester Minerals - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 31.855 million for Dorchester Minerals is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Dorchester Minerals at the current share price and the inputted number of shares is $0.5 billion.

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COMPANY NEWS

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▶ Dorchester Minerals, L.P. Announces Third Quarter Results   [Nov-03-17 02:35PM  GlobeNewswire]
▶ Should You Buy Dorchester Minerals LP (DMLP) At This PE Ratio?   [Sep-11-17 01:33PM  Simply Wall St.]
▶ Dorchester Minerals, L.P. Announces Second Quarter Results   [Aug-03-17 03:20PM  GlobeNewswire]
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Financial statements of DMLP
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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