Intrinsic value of Geospace Technologies - GEOS

Previous Close

$14.16

  Intrinsic Value

$3.75

stock screener

  Rating & Target

str. sell

-74%

Previous close

$14.16

 
Intrinsic value

$3.75

 
Up/down potential

-74%

 
Rating

str. sell

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

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
2017(a)
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  19.35
  18.80
  17.42
  16.18
  15.06
  14.05
  13.15
  12.33
  11.60
  10.94
  10.35
  9.81
  9.33
  8.90
  8.51
  8.16
  7.84
  7.56
  7.30
  7.07
  6.86
  6.68
  6.51
  6.36
  6.22
  6.10
  5.99
  5.89
  5.80
  5.72
  5.65
Revenue, $m
  74
  88
  103
  120
  138
  157
  178
  200
  223
  248
  273
  300
  328
  357
  388
  419
  452
  486
  522
  559
  597
  637
  678
  722
  767
  813
  862
  913
  966
  1,021
  1,079
Variable operating expenses, $m
 
  79
  92
  107
  123
  141
  159
  179
  200
  222
  245
  269
  294
  320
  347
  375
  405
  435
  467
  500
  534
  570
  607
  646
  686
  728
  772
  817
  864
  914
  965
Fixed operating expenses, $m
 
  64
  66
  67
  69
  70
  72
  73
  75
  77
  78
  80
  82
  84
  85
  87
  89
  91
  93
  95
  97
  99
  102
  104
  106
  109
  111
  113
  116
  118
  121
Total operating expenses, $m
  128
  143
  158
  174
  192
  211
  231
  252
  275
  299
  323
  349
  376
  404
  432
  462
  494
  526
  560
  595
  631
  669
  709
  750
  792
  837
  883
  930
  980
  1,032
  1,086
Operating income, $m
  -54
  -55
  -55
  -55
  -54
  -54
  -53
  -52
  -52
  -51
  -50
  -49
  -47
  -46
  -45
  -43
  -42
  -40
  -38
  -37
  -35
  -33
  -30
  -28
  -26
  -23
  -20
  -18
  -14
  -11
  -8
EBITDA, $m
  -36
  -47
  -46
  -44
  -42
  -40
  -37
  -35
  -32
  -29
  -26
  -22
  -19
  -15
  -11
  -6
  -2
  3
  7
  13
  18
  23
  29
  35
  42
  48
  55
  63
  70
  79
  87
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
Earnings before tax, $m
  -54
  -55
  -55
  -55
  -55
  -54
  -54
  -53
  -53
  -52
  -51
  -50
  -49
  -48
  -47
  -46
  -44
  -43
  -42
  -40
  -38
  -37
  -35
  -33
  -31
  -28
  -26
  -24
  -21
  -18
  -15
Tax expense, $m
  3
  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
  -57
  -55
  -55
  -55
  -55
  -54
  -54
  -53
  -53
  -52
  -51
  -50
  -49
  -48
  -47
  -46
  -44
  -43
  -42
  -40
  -38
  -37
  -35
  -33
  -31
  -28
  -26
  -24
  -21
  -18
  -15

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  51
  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
  206
  197
  231
  268
  309
  352
  398
  448
  499
  554
  611
  671
  734
  799
  867
  938
  1,012
  1,088
  1,168
  1,250
  1,336
  1,425
  1,518
  1,614
  1,715
  1,820
  1,929
  2,042
  2,161
  2,284
  2,413
Adjusted assets (=assets-cash), $m
  155
  197
  231
  268
  309
  352
  398
  448
  499
  554
  611
  671
  734
  799
  867
  938
  1,012
  1,088
  1,168
  1,250
  1,336
  1,425
  1,518
  1,614
  1,715
  1,820
  1,929
  2,042
  2,161
  2,284
  2,413
Revenue / Adjusted assets
  0.477
  0.447
  0.446
  0.448
  0.447
  0.446
  0.447
  0.446
  0.447
  0.448
  0.447
  0.447
  0.447
  0.447
  0.448
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
  0.447
Average production assets, $m
  65
  77
  91
  105
  121
  138
  157
  176
  196
  218
  240
  264
  288
  314
  341
  369
  397
  428
  459
  491
  525
  560
  596
  634
  674
  715
  758
  802
  849
  898
  948
Working capital, $m
  75
  44
  52
  60
  69
  79
  89
  100
  112
  124
  137
  150
  164
  179
  194
  210
  226
  243
  261
  279
  299
  319
  339
  361
  383
  407
  431
  456
  483
  511
  539
Total debt, $m
  0
  2
  4
  6
  9
  12
  15
  18
  21
  25
  28
  32
  36
  40
  45
  49
  54
  59
  64
  69
  75
  81
  86
  93
  99
  106
  113
  120
  128
  135
  144
Total liabilities, $m
  11
  13
  15
  17
  20
  23
  25
  29
  32
  35
  39
  43
  47
  51
  56
  60
  65
  70
  75
  80
  85
  91
  97
  103
  110
  116
  123
  131
  138
  146
  154
Total equity, $m
  195
  184
  216
  251
  289
  330
  373
  419
  467
  519
  572
  628
  687
  748
  812
  878
  947
  1,018
  1,093
  1,170
  1,250
  1,334
  1,421
  1,511
  1,605
  1,703
  1,805
  1,911
  2,022
  2,138
  2,259
Total liabilities and equity, $m
  206
  197
  231
  268
  309
  353
  398
  448
  499
  554
  611
  671
  734
  799
  868
  938
  1,012
  1,088
  1,168
  1,250
  1,335
  1,425
  1,518
  1,614
  1,715
  1,819
  1,928
  2,042
  2,160
  2,284
  2,413
Debt-to-equity ratio
  0.000
  0.010
  0.020
  0.030
  0.030
  0.040
  0.040
  0.040
  0.050
  0.050
  0.050
  0.050
  0.050
  0.050
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
Adjusted equity ratio
  0.929
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936
  0.936

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -57
  -55
  -55
  -55
  -55
  -54
  -54
  -53
  -53
  -52
  -51
  -50
  -49
  -48
  -47
  -46
  -44
  -43
  -42
  -40
  -38
  -37
  -35
  -33
  -31
  -28
  -26
  -24
  -21
  -18
  -15
Depreciation, amort., depletion, $m
  18
  8
  9
  11
  12
  14
  16
  18
  20
  22
  24
  26
  29
  31
  34
  37
  40
  43
  46
  49
  52
  56
  60
  63
  67
  71
  76
  80
  85
  90
  95
Funds from operations, $m
  36
  -47
  -46
  -44
  -42
  -40
  -38
  -36
  -33
  -30
  -27
  -24
  -20
  -17
  -13
  -9
  -5
  0
  4
  9
  14
  19
  25
  31
  37
  43
  50
  57
  64
  72
  80
Change in working capital, $m
  26
  7
  8
  8
  9
  10
  10
  11
  12
  12
  13
  13
  14
  15
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  22
  23
  24
  25
  26
  28
  29
Cash from operations, $m
  10
  -54
  -54
  -53
  -51
  -50
  -48
  -47
  -44
  -42
  -40
  -37
  -34
  -31
  -28
  -25
  -21
  -17
  -13
  -9
  -5
  -1
  4
  9
  14
  20
  25
  31
  37
  44
  51
Maintenance CAPEX, $m
  0
  -6
  -8
  -9
  -11
  -12
  -14
  -16
  -18
  -20
  -22
  -24
  -26
  -29
  -31
  -34
  -37
  -40
  -43
  -46
  -49
  -52
  -56
  -60
  -63
  -67
  -71
  -76
  -80
  -85
  -90
New CAPEX, $m
  -2
  -12
  -13
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -32
  -34
  -35
  -36
  -38
  -39
  -41
  -43
  -45
  -47
  -49
  -51
Cash from investing activities, $m
  -5
  -18
  -21
  -24
  -27
  -29
  -32
  -35
  -38
  -41
  -45
  -48
  -51
  -55
  -58
  -62
  -66
  -70
  -74
  -78
  -83
  -87
  -92
  -98
  -102
  -108
  -114
  -121
  -127
  -134
  -141
Free cash flow, $m
  5
  -73
  -75
  -76
  -78
  -79
  -80
  -82
  -82
  -83
  -84
  -85
  -85
  -86
  -86
  -87
  -87
  -87
  -87
  -88
  -88
  -88
  -88
  -89
  -89
  -89
  -89
  -89
  -89
  -89
  -90
Issuance/(repayment) of debt, $m
  0
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
Issuance/(repurchase) of shares, $m
  0
  85
  87
  90
  92
  95
  97
  99
  101
  103
  105
  106
  108
  109
  111
  112
  113
  115
  116
  117
  119
  120
  122
  123
  125
  126
  128
  130
  132
  134
  136
Cash from financing (excl. dividends), $m  
  0
  87
  89
  92
  95
  98
  100
  102
  104
  106
  109
  110
  112
  113
  115
  117
  118
  120
  121
  122
  124
  126
  128
  129
  131
  133
  135
  137
  140
  142
  144
Total cash flow (excl. dividends), $m
  5
  13
  14
  16
  17
  18
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  31
  32
  34
  35
  36
  38
  39
  41
  42
  44
  46
  48
  50
  52
  55
Retained Cash Flow (-), $m
  49
  -85
  -87
  -90
  -92
  -95
  -97
  -99
  -101
  -103
  -105
  -106
  -108
  -109
  -111
  -112
  -113
  -115
  -116
  -117
  -119
  -120
  -122
  -123
  -125
  -126
  -128
  -130
  -132
  -134
  -136
Prev. year cash balance distribution, $m
 
  41
  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
 
  6
  7
  8
  9
  11
  12
  14
  16
  17
  19
  21
  23
  26
  28
  30
  33
  35
  38
  41
  44
  47
  50
  53
  56
  60
  63
  67
  71
  75
  80
Cash available for distribution, $m
 
  -31
  -73
  -74
  -75
  -76
  -77
  -78
  -79
  -80
  -80
  -81
  -81
  -82
  -82
  -82
  -82
  -82
  -82
  -82
  -82
  -82
  -82
  -82
  -82
  -82
  -82
  -82
  -82
  -82
  -81
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
 
  -29
  -67
  -64
  -62
  -59
  -56
  -53
  -49
  -46
  -42
  -38
  -35
  -31
  -27
  -24
  -21
  -18
  -15
  -13
  -10
  -9
  -7
  -5
  -4
  -3
  -2
  -2
  -1
  -1
  -1
Current shareholders' claim on cash, %
  100
  63.2
  42.1
  29.2
  21.0
  15.6
  11.9
  9.3
  7.4
  6.0
  4.9
  4.1
  3.5
  3.0
  2.6
  2.3
  2.0
  1.8
  1.6
  1.4
  1.3
  1.2
  1.1
  1.0
  0.9
  0.8
  0.8
  0.7
  0.7
  0.6
  0.6

Geospace Technologies Corporation designs and manufactures instruments and equipment used by the oil and gas industry to acquire seismic data in order to locate, characterize and monitor hydrocarbon producing reservoirs. The Company also designs and manufactures non-seismic products, including industrial products, offshore cables and imaging equipment. The Company operates through two segments: Seismic and Non-Seismic. The Company's Seismic product segments include traditional exploration products, wireless exploration products and reservoir products. Its seismic product lines consist of land and marine nodal data acquisition systems, permanent land and seabed reservoir monitoring products and services, geophones and geophone strings, hydrophones, leader wire, connectors, telemetry cables, marine streamer retrieval and steering devices and various other products. The Company's Non-Seismic product segments include imaging and industrial products.

FINANCIAL RATIOS  of  Geospace Technologies (GEOS)

Valuation Ratios
P/E Ratio -3.3
Price to Sales 2.6
Price to Book 1
Price to Tangible Book
Price to Cash Flow 19
Price to Free Cash Flow 23.8
Growth Rates
Sales Growth Rate 19.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate -43.3%
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 -24.7%
Ret/ On Assets - 3 Yr. Avg. -17.1%
Return On Total Capital -26%
Ret/ On T. Cap. - 3 Yr. Avg. -18%
Return On Equity -26%
Return On Equity - 3 Yr. Avg. -18%
Asset Turnover 0.3
Profitability Ratios
Gross Margin -28.4%
Gross Margin - 3 Yr. Avg. -24%
EBITDA Margin -48.6%
EBITDA Margin - 3 Yr. Avg. -46.8%
Operating Margin -73%
Oper. Margin - 3 Yr. Avg. -74.8%
Pre-Tax Margin -73%
Pre-Tax Margin - 3 Yr. Avg. -73.5%
Net Profit Margin -77%
Net Profit Margin - 3 Yr. Avg. -63.3%
Effective Tax Rate -5.6%
Eff/ Tax Rate - 3 Yr. Avg. 14.9%
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 $74 million for the last fiscal year's total revenue generated by Geospace Technologies. The default revenue input number comes from 2017 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 18.8% 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 89.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $63 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 5.4% 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 7.8%.

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 87.9%.

Life of production assets of 10 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 - $195 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 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: Fiscal 2Q Earnings Snapshot   [May-04-18 05:05AM  Associated Press]
▶ Geospace Technologies reports 1Q loss   [Feb-06-18 06:27PM  Associated Press]
▶ Houston oil and gas equipment manufacturer cutting costs, local jobs again   [Dec-27-17 09:30AM  American City Business Journals]
▶ Geospace Technologies Announces Cost Reductions   [Dec-14-17 04:30PM  Business Wire]
▶ Geospace Technologies' Revenue, EPS Losses Climb   [Dec-01-17 02:02PM  Motley Fool]
▶ Geospace Technologies reports 4Q loss   [Nov-30-17 04:39PM  Associated Press]
▶ Geospace Technologies reports 3Q loss   [03:17AM  Associated Press]
▶ Geospace Technologies reports 2Q loss   [05:03AM  Associated Press]
▶ Geospace Technologies reports 1Q loss   [Feb-08-17 04:52PM  Associated Press]
Financial statements of GEOS
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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