Intrinsic value of DryShips - DRYS

Previous Close

$3.20

  Intrinsic Value

$0.84

stock screener

  Rating & Target

str. sell

-74%

  Value-price divergence*

+2%

Previous close

$3.20

 
Intrinsic value

$0.84

 
Up/down potential

-74%

 
Rating

str. sell

 
Value-price divergence*

+2%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of DRYS 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

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 0.0

 

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, %
  -94.64
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  52
  53
  54
  56
  57
  59
  61
  63
  65
  68
  70
  73
  76
  79
  82
  86
  90
  94
  98
  102
  107
  112
  117
  123
  129
  135
  141
  148
  155
  163
  171
Variable operating expenses, $m
 
  95
  97
  100
  102
  105
  109
  113
  117
  121
  125
  130
  136
  141
  147
  154
  160
  168
  175
  183
  192
  200
  210
  220
  230
  241
  253
  265
  277
  291
  305
Fixed operating expenses, $m
 
  114
  117
  120
  123
  126
  129
  132
  135
  139
  142
  146
  149
  153
  157
  161
  165
  169
  173
  177
  182
  186
  191
  196
  201
  206
  211
  216
  222
  227
  233
Total operating expenses, $m
  201
  209
  214
  220
  225
  231
  238
  245
  252
  260
  267
  276
  285
  294
  304
  315
  325
  337
  348
  360
  374
  386
  401
  416
  431
  447
  464
  481
  499
  518
  538
Operating income, $m
  -149
  -156
  -159
  -163
  -168
  -172
  -177
  -182
  -187
  -192
  -197
  -203
  -209
  -215
  -222
  -229
  -236
  -243
  -250
  -258
  -266
  -275
  -284
  -293
  -302
  -312
  -322
  -333
  -344
  -355
  -367
EBITDA, $m
  -146
  -152
  -156
  -160
  -164
  -168
  -173
  -178
  -183
  -188
  -193
  -199
  -204
  -210
  -217
  -223
  -230
  -237
  -244
  -252
  -260
  -268
  -276
  -285
  -294
  -304
  -314
  -324
  -334
  -345
  -357
Interest expense (income), $m
  6
  0
  0
  0
  0
  1
  1
  1
  1
  2
  2
  2
  3
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  9
  10
  10
  11
  12
  13
  14
Earnings before tax, $m
  -157
  -156
  -160
  -164
  -168
  -173
  -178
  -183
  -188
  -194
  -199
  -205
  -212
  -218
  -225
  -232
  -240
  -247
  -256
  -264
  -273
  -282
  -291
  -301
  -311
  -322
  -333
  -344
  -356
  -368
  -381
Tax expense, $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
Net income, $m
  -199
  -156
  -160
  -164
  -168
  -173
  -178
  -183
  -188
  -194
  -199
  -205
  -212
  -218
  -225
  -232
  -240
  -247
  -256
  -264
  -273
  -282
  -291
  -301
  -311
  -322
  -333
  -344
  -356
  -368
  -381

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  76
  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
  194
  151
  155
  159
  163
  168
  173
  179
  186
  193
  200
  208
  216
  225
  235
  245
  256
  267
  279
  292
  305
  319
  334
  350
  367
  384
  402
  422
  442
  463
  486
Adjusted assets (=assets-cash), $m
  118
  151
  155
  159
  163
  168
  173
  179
  186
  193
  200
  208
  216
  225
  235
  245
  256
  267
  279
  292
  305
  319
  334
  350
  367
  384
  402
  422
  442
  463
  486
Revenue / Adjusted assets
  0.441
  0.351
  0.348
  0.352
  0.350
  0.351
  0.353
  0.352
  0.349
  0.352
  0.350
  0.351
  0.352
  0.351
  0.349
  0.351
  0.352
  0.352
  0.351
  0.349
  0.351
  0.351
  0.350
  0.351
  0.351
  0.352
  0.351
  0.351
  0.351
  0.352
  0.352
Average production assets, $m
  96
  98
  100
  103
  106
  109
  112
  116
  120
  125
  130
  135
  140
  146
  152
  159
  166
  173
  181
  189
  198
  207
  217
  227
  237
  249
  261
  273
  286
  300
  315
Working capital, $m
  71
  12
  13
  13
  13
  14
  14
  15
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  33
  34
  36
  38
  39
Total debt, $m
  17
  3
  5
  9
  13
  17
  22
  27
  32
  38
  44
  51
  58
  66
  74
  83
  92
  102
  112
  123
  135
  147
  159
  173
  187
  202
  218
  234
  252
  270
  289
Total liabilities, $m
  144
  130
  132
  136
  140
  144
  149
  154
  159
  165
  171
  178
  185
  193
  201
  210
  219
  229
  239
  250
  262
  274
  286
  300
  314
  329
  345
  361
  379
  397
  416
Total equity, $m
  50
  22
  22
  23
  23
  24
  25
  26
  27
  28
  29
  30
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
  48
  50
  52
  55
  58
  60
  63
  66
  69
Total liabilities and equity, $m
  194
  152
  154
  159
  163
  168
  174
  180
  186
  193
  200
  208
  216
  225
  235
  245
  256
  267
  279
  292
  306
  320
  334
  350
  366
  384
  403
  421
  442
  463
  485
Debt-to-equity ratio
  0.340
  0.120
  0.250
  0.390
  0.550
  0.710
  0.870
  1.040
  1.210
  1.380
  1.550
  1.720
  1.890
  2.050
  2.210
  2.370
  2.520
  2.670
  2.810
  2.950
  3.080
  3.210
  3.340
  3.460
  3.570
  3.680
  3.790
  3.890
  3.980
  4.080
  4.170
Adjusted equity ratio
  -0.220
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -199
  -156
  -160
  -164
  -168
  -173
  -178
  -183
  -188
  -194
  -199
  -205
  -212
  -218
  -225
  -232
  -240
  -247
  -256
  -264
  -273
  -282
  -291
  -301
  -311
  -322
  -333
  -344
  -356
  -368
  -381
Depreciation, amort., depletion, $m
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  10
Funds from operations, $m
  -8
  -152
  -156
  -160
  -165
  -169
  -174
  -179
  -184
  -189
  -195
  -201
  -207
  -213
  -220
  -227
  -234
  -242
  -249
  -258
  -266
  -275
  -284
  -293
  -303
  -313
  -324
  -335
  -346
  -358
  -371
Change in working capital, $m
  17
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
Cash from operations, $m
  -25
  -153
  -156
  -161
  -165
  -169
  -174
  -179
  -184
  -190
  -196
  -202
  -208
  -214
  -221
  -228
  -235
  -243
  -250
  -259
  -267
  -276
  -285
  -295
  -304
  -315
  -325
  -336
  -348
  -360
  -372
Maintenance CAPEX, $m
  0
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
New CAPEX, $m
  0
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
Cash from investing activities, $m
  70
  -5
  -5
  -6
  -6
  -7
  -8
  -8
  -8
  -8
  -9
  -9
  -9
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -17
  -19
  -19
  -20
  -22
  -22
  -24
  -25
Free cash flow, $m
  45
  -158
  -162
  -166
  -171
  -176
  -181
  -187
  -192
  -198
  -205
  -211
  -218
  -225
  -232
  -239
  -247
  -256
  -264
  -273
  -282
  -292
  -302
  -312
  -323
  -334
  -346
  -358
  -370
  -383
  -397
Issuance/(repayment) of debt, $m
  -92
  3
  3
  3
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  17
  18
  19
Issuance/(repurchase) of shares, $m
  124
  156
  160
  164
  169
  173
  178
  183
  189
  195
  200
  207
  213
  220
  227
  234
  241
  249
  257
  266
  274
  284
  293
  303
  313
  324
  335
  347
  359
  371
  384
Cash from financing (excl. dividends), $m  
  32
  159
  163
  167
  173
  177
  183
  188
  194
  201
  206
  214
  220
  228
  235
  243
  250
  259
  267
  277
  285
  296
  306
  316
  327
  339
  351
  364
  376
  389
  403
Total cash flow (excl. dividends), $m
  76
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
Retained Cash Flow (-), $m
  71
  -156
  -160
  -164
  -169
  -173
  -178
  -183
  -189
  -195
  -200
  -207
  -213
  -220
  -227
  -234
  -241
  -249
  -257
  -266
  -274
  -284
  -293
  -303
  -313
  -324
  -335
  -347
  -359
  -371
  -384
Prev. year cash balance distribution, $m
 
  29
  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
 
  -126
  -159
  -163
  -167
  -172
  -177
  -182
  -187
  -192
  -198
  -204
  -210
  -217
  -224
  -231
  -238
  -246
  -254
  -262
  -271
  -280
  -289
  -298
  -308
  -319
  -330
  -341
  -353
  -365
  -378
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
 
  -121
  -146
  -142
  -138
  -133
  -128
  -123
  -117
  -111
  -104
  -97
  -90
  -82
  -75
  -68
  -61
  -53
  -47
  -40
  -34
  -29
  -24
  -20
  -16
  -12
  -10
  -7
  -5
  -4
  -3
Current shareholders' claim on cash, %
  100
  11.5
  1.3
  0.1
  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
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

DryShips Inc. provides seaborne dry cargo and offshore support services. The company operates through Drybulk and Offshore Support segments. The Drybulk segment provides drybulk commodities transportation services for the steel, electric utility, construction, and agri-food industries. The Offshore Support segment offers its services to the global offshore energy industry. As of January 20, 2017, it owned a fleet of 13 Panamax drybulk carriers with a combined deadweight tonnage of approximately 1.0 million tons; and 6 offshore supply vessels comprising 2 platform supply and 4 oil spill recovery vessels, as well as 1 very large gas carrier newbuilding. The company was founded in 2004 and is based in Athens, Greece.

FINANCIAL RATIOS  of  DryShips (DRYS)

Valuation Ratios
P/E Ratio -0
Price to Sales 0
Price to Book 0
Price to Tangible Book
Price to Cash Flow -0
Price to Free Cash Flow -0
Growth Rates
Sales Growth Rate -94.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -100%
Cap. Spend. - 3 Yr. Gr. Rate -100%
Financial Strength
Quick Ratio 4
Current Ratio 0.1
LT Debt to Equity 0%
Total Debt to Equity 34%
Interest Coverage -25
Management Effectiveness
Return On Assets -57.6%
Ret/ On Assets - 3 Yr. Avg. -35.6%
Return On Total Capital -98%
Ret/ On T. Cap. - 3 Yr. Avg. -54.3%
Return On Equity -232.7%
Return On Equity - 3 Yr. Avg. -139.1%
Asset Turnover 0.2
Profitability Ratios
Gross Margin -5.8%
Gross Margin - 3 Yr. Avg. 35.1%
EBITDA Margin -284.6%
EBITDA Margin - 3 Yr. Avg. -106.2%
Operating Margin -286.5%
Oper. Margin - 3 Yr. Avg. -117.5%
Pre-Tax Margin -301.9%
Pre-Tax Margin - 3 Yr. Avg. -135.5%
Net Profit Margin -382.7%
Net Profit Margin - 3 Yr. Avg. -226.1%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 18%
Payout Ratio 0%

DRYS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DRYS stock intrinsic value calculation we used $52 million for the last fiscal year's total revenue generated by DryShips. The default revenue input number comes from 2016 income statement of DryShips. 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 DRYS stock valuation model: a) initial revenue growth rate of 2% 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 DRYS is calculated based on our internal credit rating of DryShips, 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 DryShips.
    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 DRYS stock the variable cost ratio is equal to 178.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $111 million in the base year in the intrinsic value calculation for DRYS 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 5.1% for DryShips.

Corporate tax rate of 27% is the nominal tax rate for DryShips. 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 DRYS 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 DRYS are equal to 184.6%.

Life of production assets of 33.2 years is the average useful life of capital assets used in DryShips 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 DRYS is equal to 23.1%. 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 - $50 million for DryShips - 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 14.864 million for DryShips 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 DryShips at the current share price and the inputted number of shares is $0.0 billion.

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COMPANY NEWS

▶ These 3 Stocks Deserve Your Attention   [08:45AM  ACCESSWIRE]
▶ [$$] DryShips Stock Is Up 50%: Sell on the Surge   [12:21AM  The Wall Street Journal]
▶ [$$] DryShips: Sell on the Surge   [01:34PM  The Wall Street Journal]
▶ Sail of the Century at DryShips   [01:04PM  The Wall Street Journal]
▶ DryShips Inc. Announces Reverse Stock Split   [Jul-18-17 04:05PM  Marketwired]
Stock chart of DRYS Financial statements of DRYS
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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