Intrinsic value of Geospace Technologies - GEOS

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$15.28

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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$15.28

 
Intrinsic value

$4.49

 
Up/down potential

-71%

 
Rating

str. sell

 
Value-price divergence* premium content

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

We calculate the intrinsic value of GEOS 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 0.2

 

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, %
  -27.06
  15.40
  14.36
  13.42
  12.58
  11.82
  11.14
  10.53
  9.97
  9.48
  9.03
  8.63
  8.26
  7.94
  7.64
  7.38
  7.14
  6.93
  6.73
  6.56
  6.40
  6.26
  6.14
  6.02
  5.92
  5.83
  5.75
  5.67
  5.60
  5.54
  5.49
Revenue, $m
  62
  72
  82
  93
  104
  117
  130
  144
  158
  173
  188
  205
  222
  239
  257
  276
  296
  317
  338
  360
  383
  407
  432
  458
  485
  514
  543
  574
  606
  640
  675
Variable operating expenses, $m
 
  59
  67
  76
  86
  96
  107
  118
  130
  142
  155
  168
  182
  197
  212
  227
  244
  261
  278
  296
  315
  335
  356
  377
  400
  423
  447
  472
  499
  527
  556
Fixed operating expenses, $m
 
  71
  72
  74
  76
  78
  80
  82
  84
  86
  88
  91
  93
  95
  97
  100
  102
  105
  108
  110
  113
  116
  119
  122
  125
  128
  131
  134
  138
  141
  145
Total operating expenses, $m
  118
  130
  139
  150
  162
  174
  187
  200
  214
  228
  243
  259
  275
  292
  309
  327
  346
  366
  386
  406
  428
  451
  475
  499
  525
  551
  578
  606
  637
  668
  701
Operating income, $m
  -56
  -58
  -58
  -58
  -58
  -57
  -57
  -57
  -56
  -56
  -55
  -54
  -54
  -53
  -52
  -51
  -50
  -49
  -48
  -47
  -45
  -44
  -42
  -41
  -39
  -37
  -35
  -33
  -30
  -28
  -25
EBITDA, $m
  -36
  -38
  -36
  -32
  -29
  -25
  -21
  -17
  -13
  -8
  -3
  2
  7
  13
  19
  25
  31
  38
  45
  52
  60
  68
  76
  85
  94
  104
  114
  125
  136
  148
  160
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
Earnings before tax, $m
  -55
  -58
  -58
  -58
  -58
  -58
  -57
  -57
  -57
  -56
  -56
  -55
  -54
  -54
  -53
  -52
  -51
  -50
  -49
  -48
  -47
  -46
  -44
  -43
  -41
  -40
  -38
  -36
  -34
  -31
  -29
Tax expense, $m
  -9
  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
  -46
  -58
  -58
  -58
  -58
  -58
  -57
  -57
  -57
  -56
  -56
  -55
  -54
  -54
  -53
  -52
  -51
  -50
  -49
  -48
  -47
  -46
  -44
  -43
  -41
  -40
  -38
  -36
  -34
  -31
  -29

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  38
  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
  255
  250
  286
  324
  365
  409
  454
  502
  552
  604
  659
  716
  775
  836
  900
  967
  1,036
  1,107
  1,182
  1,259
  1,340
  1,424
  1,511
  1,602
  1,697
  1,796
  1,899
  2,007
  2,120
  2,237
  2,360
Adjusted assets (=assets-cash), $m
  217
  250
  286
  324
  365
  409
  454
  502
  552
  604
  659
  716
  775
  836
  900
  967
  1,036
  1,107
  1,182
  1,259
  1,340
  1,424
  1,511
  1,602
  1,697
  1,796
  1,899
  2,007
  2,120
  2,237
  2,360
Revenue / Adjusted assets
  0.286
  0.288
  0.287
  0.287
  0.285
  0.286
  0.286
  0.287
  0.286
  0.286
  0.285
  0.286
  0.286
  0.286
  0.286
  0.285
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
  0.286
Average production assets, $m
  85
  98
  112
  127
  143
  160
  178
  197
  216
  237
  258
  281
  304
  328
  353
  379
  406
  434
  463
  494
  525
  558
  593
  628
  666
  704
  745
  787
  831
  877
  925
Working capital, $m
  164
  36
  41
  46
  52
  58
  65
  72
  79
  86
  94
  102
  111
  120
  129
  138
  148
  158
  169
  180
  192
  204
  216
  229
  243
  257
  272
  287
  303
  320
  337
Total debt, $m
  0
  2
  4
  6
  8
  10
  12
  15
  17
  20
  23
  25
  29
  32
  35
  38
  42
  45
  49
  53
  57
  62
  66
  71
  76
  81
  86
  91
  97
  103
  109
Total liabilities, $m
  10
  13
  15
  17
  19
  21
  23
  26
  28
  31
  34
  36
  40
  43
  46
  49
  53
  56
  60
  64
  68
  73
  77
  82
  87
  92
  97
  102
  108
  114
  120
Total equity, $m
  244
  237
  272
  308
  347
  388
  431
  476
  524
  573
  625
  679
  735
  794
  854
  917
  983
  1,051
  1,122
  1,195
  1,272
  1,351
  1,434
  1,521
  1,611
  1,705
  1,803
  1,905
  2,012
  2,123
  2,240
Total liabilities and equity, $m
  254
  250
  287
  325
  366
  409
  454
  502
  552
  604
  659
  715
  775
  837
  900
  966
  1,036
  1,107
  1,182
  1,259
  1,340
  1,424
  1,511
  1,603
  1,698
  1,797
  1,900
  2,007
  2,120
  2,237
  2,360
Debt-to-equity ratio
  0.000
  0.010
  0.010
  0.020
  0.020
  0.030
  0.030
  0.030
  0.030
  0.030
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
  0.050
  0.050
  0.050
  0.050
  0.050
  0.050
  0.050
  0.050
  0.050
  0.050
  0.050
Adjusted equity ratio
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -46
  -58
  -58
  -58
  -58
  -58
  -57
  -57
  -57
  -56
  -56
  -55
  -54
  -54
  -53
  -52
  -51
  -50
  -49
  -48
  -47
  -46
  -44
  -43
  -41
  -40
  -38
  -36
  -34
  -31
  -29
Depreciation, amort., depletion, $m
  20
  20
  22
  25
  29
  32
  36
  39
  43
  47
  52
  56
  61
  66
  71
  76
  81
  87
  93
  99
  105
  112
  119
  126
  133
  141
  149
  157
  166
  175
  185
Funds from operations, $m
  1
  -38
  -36
  -33
  -29
  -26
  -22
  -18
  -13
  -9
  -4
  1
  6
  12
  18
  24
  30
  36
  43
  50
  58
  66
  74
  83
  92
  101
  111
  122
  133
  144
  156
Change in working capital, $m
  3
  5
  5
  5
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  12
  13
  14
  14
  15
  15
  16
  17
  18
Cash from operations, $m
  -2
  -52
  -41
  -38
  -35
  -32
  -28
  -25
  -21
  -16
  -12
  -7
  -2
  3
  8
  14
  20
  26
  33
  39
  46
  54
  62
  70
  78
  87
  96
  106
  116
  127
  139
Maintenance CAPEX, $m
  0
  -17
  -20
  -22
  -25
  -29
  -32
  -36
  -39
  -43
  -47
  -52
  -56
  -61
  -66
  -71
  -76
  -81
  -87
  -93
  -99
  -105
  -112
  -119
  -126
  -133
  -141
  -149
  -157
  -166
  -175
New CAPEX, $m
  -2
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -34
  -36
  -37
  -39
  -40
  -42
  -44
  -46
  -48
Cash from investing activities, $m
  -10
  -30
  -34
  -37
  -41
  -46
  -50
  -55
  -59
  -64
  -68
  -74
  -79
  -85
  -91
  -97
  -103
  -109
  -116
  -123
  -131
  -138
  -146
  -155
  -163
  -172
  -181
  -191
  -201
  -212
  -223
Free cash flow, $m
  -12
  -82
  -74
  -76
  -77
  -77
  -78
  -79
  -80
  -80
  -81
  -81
  -81
  -82
  -82
  -83
  -83
  -83
  -83
  -84
  -84
  -84
  -84
  -85
  -85
  -85
  -85
  -85
  -85
  -85
  -85
Issuance/(repayment) of debt, $m
  0
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
Issuance/(repurchase) of shares, $m
  0
  74
  107
  110
  113
  116
  119
  122
  124
  127
  130
  132
  135
  137
  140
  142
  145
  148
  150
  153
  156
  160
  163
  166
  170
  174
  178
  182
  186
  191
  195
Cash from financing (excl. dividends), $m  
  0
  76
  109
  112
  115
  118
  121
  124
  127
  130
  133
  135
  138
  140
  143
  145
  149
  152
  154
  157
  160
  164
  167
  171
  175
  179
  183
  187
  192
  197
  201
Total cash flow (excl. dividends), $m
  -12
  -81
  -73
  -74
  -74
  -75
  -76
  -76
  -77
  -77
  -78
  -78
  -78
  -79
  -79
  -79
  -79
  -80
  -80
  -80
  -80
  -80
  -80
  -80
  -80
  -80
  -80
  -80
  -79
  -79
  -79
Retained Cash Flow (-), $m
  46
  -31
  -34
  -36
  -39
  -41
  -43
  -45
  -48
  -50
  -52
  -54
  -56
  -58
  -61
  -63
  -66
  -68
  -71
  -74
  -77
  -80
  -83
  -86
  -90
  -94
  -98
  -102
  -107
  -112
  -117
Prev. year cash balance distribution, $m
 
  38
  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
 
  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
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
 
  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
Current shareholders' claim on cash, %
  100
  70.3
  46.0
  31.1
  21.7
  15.6
  11.5
  8.6
  6.6
  5.1
  4.0
  3.2
  2.6
  2.2
  1.8
  1.5
  1.3
  1.1
  0.9
  0.8
  0.7
  0.6
  0.5
  0.5
  0.4
  0.4
  0.3
  0.3
  0.3
  0.2
  0.2

Geospace Technologies Corporation, together with its subsidiaries, designs and manufactures seismic instruments and equipment for the oil and gas industry in the United States, Canada, Colombia, the Russian Federation, and the United Kingdom. The company operates through two segments, Seismic and Non-Seismic. The Seismic segment offers land and marine nodal data acquisition systems; permanent land and seabed reservoir monitoring products and services; geophones and geophone strings; hydrophones; leader wires; connectors; telemetry cables; marine streamer retrieval and steering devices; and various other products. It also provides multi-component sensors; and seismic borehole acquisition systems. The Non-Seismic segment offers electronic pre-press products that employ direct thermal imaging and digital inkjet printing technologies targeted at the commercial graphics, industrial graphics, textile, and flexographic printing industries. This segment provides thermal imaging products for the commercial graphics industry; sensors and tools for vibration monitoring, mine safety application, and earthquake detection; cables for power and communication used in the offshore oil and gas, and offshore construction industries; water meter cables; and other specialty industrial cable and connector products. The company serves seismic contractors, and independent and government-owned oil and gas companies; direct users of equipment; specialized resellers; and specialty manufacturers, research institutions, and industrial product distributors. Geospace Technologies Corporation was founded in 1980 and is headquartered in Houston, Texas.

FINANCIAL RATIOS  of  Geospace Technologies (GEOS)

Valuation Ratios
P/E Ratio -4.4
Price to Sales 3.3
Price to Book 0.8
Price to Tangible Book
Price to Cash Flow -101.8
Price to Free Cash Flow -50.9
Growth Rates
Sales Growth Rate -27.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -66.7%
Cap. Spend. - 3 Yr. Gr. Rate -45.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets -16.5%
Ret/ On Assets - 3 Yr. Avg. -5.2%
Return On Total Capital -17.2%
Ret/ On T. Cap. - 3 Yr. Avg. -5.3%
Return On Equity -17.2%
Return On Equity - 3 Yr. Avg. -5.3%
Asset Turnover 0.2
Profitability Ratios
Gross Margin -30.6%
Gross Margin - 3 Yr. Avg. -1%
EBITDA Margin -56.5%
EBITDA Margin - 3 Yr. Avg. -20.5%
Operating Margin -90.3%
Oper. Margin - 3 Yr. Avg. -42.9%
Pre-Tax Margin -88.7%
Pre-Tax Margin - 3 Yr. Avg. -41.6%
Net Profit Margin -74.2%
Net Profit Margin - 3 Yr. Avg. -32.5%
Effective Tax Rate 16.4%
Eff/ Tax Rate - 3 Yr. Avg. 27.3%
Payout Ratio 0%

GEOS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GEOS stock intrinsic value calculation we used $62 million for the last fiscal year's total revenue generated by Geospace Technologies. The default revenue input number comes from 2016 income statement of Geospace Technologies. 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 GEOS stock valuation model: a) initial revenue growth rate of 15.4% 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 GEOS is calculated based on our internal credit rating of Geospace Technologies, 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 Geospace Technologies.
    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 GEOS stock the variable cost ratio is equal to 82.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $69 million in the base year in the intrinsic value calculation for GEOS 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 Geospace Technologies.

Corporate tax rate of 27% is the nominal tax rate for Geospace Technologies. 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 GEOS 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 GEOS are equal to 137.1%.

Life of production assets of 4.3 years is the average useful life of capital assets used in Geospace Technologies 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 GEOS is equal to 50%. 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 - $244 million for Geospace Technologies - 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 13.577 million for Geospace Technologies 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 Geospace Technologies at the current share price and the inputted number of shares is $0.2 billion.


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COMPANY NEWS

▶ Geospace Technologies reports 1Q loss   [Feb-08-17 04:52PM  Associated Press]
▶ 2 Stocks Below Net Currrent Asset Value   [Dec-17  02:00PM  at Investopedia]
▶ Is Quantum Corp (QTM) Going to Burn These Hedge Funds?   [Nov-25  02:30PM  at Insider Monkey]
Stock chart of GEOS Financial statements of GEOS
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