Intrinsic value of Mitcham Industries - MIND

Previous Close

$3.19

  Intrinsic Value

$1.56

stock screener

  Rating & Target

str. sell

-51%

  Value-price divergence*

-44%

Previous close

$3.19

 
Intrinsic value

$1.56

 
Up/down potential

-51%

 
Rating

str. sell

 
Value-price divergence*

-44%

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

We calculate the intrinsic value of MIND 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 2017), $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
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, %
  -21.15
  50.00
  45.50
  41.45
  37.81
  34.52
  31.57
  28.91
  26.52
  24.37
  22.43
  20.69
  19.12
  17.71
  16.44
  15.29
  14.27
  13.34
  12.50
  11.75
  11.08
  10.47
  9.92
  9.43
  8.99
  8.59
  8.23
  7.91
  7.62
  7.36
  7.12
Revenue, $m
  41
  62
  89
  127
  174
  235
  309
  398
  504
  626
  767
  925
  1,102
  1,298
  1,511
  1,742
  1,990
  2,256
  2,538
  2,836
  3,151
  3,481
  3,826
  4,187
  4,563
  4,955
  5,363
  5,787
  6,228
  6,686
  7,162
Variable operating expenses, $m
 
  39
  56
  79
  109
  147
  193
  249
  315
  391
  479
  578
  688
  810
  943
  1,087
  1,243
  1,408
  1,584
  1,771
  1,967
  2,173
  2,388
  2,614
  2,849
  3,093
  3,348
  3,613
  3,888
  4,174
  4,471
Fixed operating expenses, $m
 
  48
  49
  51
  52
  53
  55
  56
  57
  59
  60
  62
  63
  65
  66
  68
  70
  72
  73
  75
  77
  79
  81
  83
  85
  87
  89
  92
  94
  96
  99
Total operating expenses, $m
  72
  87
  105
  130
  161
  200
  248
  305
  372
  450
  539
  640
  751
  875
  1,009
  1,155
  1,313
  1,480
  1,657
  1,846
  2,044
  2,252
  2,469
  2,697
  2,934
  3,180
  3,437
  3,705
  3,982
  4,270
  4,570
Operating income, $m
  -31
  -25
  -16
  -3
  13
  35
  61
  93
  132
  176
  228
  286
  351
  423
  501
  586
  678
  776
  880
  991
  1,107
  1,229
  1,357
  1,490
  1,630
  1,775
  1,926
  2,083
  2,246
  2,416
  2,593
EBITDA, $m
  -3
  -5
  14
  39
  72
  113
  164
  226
  299
  384
  482
  593
  717
  853
  1,003
  1,164
  1,339
  1,525
  1,723
  1,932
  2,152
  2,384
  2,626
  2,879
  3,144
  3,419
  3,705
  4,003
  4,313
  4,634
  4,969
Interest expense (income), $m
  1
  0
  1
  1
  2
  3
  4
  6
  8
  10
  12
  15
  19
  22
  26
  31
  35
  41
  46
  52
  58
  65
  71
  79
  86
  94
  102
  110
  119
  128
  138
Earnings before tax, $m
  -31
  -26
  -17
  -5
  11
  32
  57
  87
  124
  166
  215
  271
  332
  401
  475
  556
  643
  736
  834
  939
  1,049
  1,164
  1,285
  1,412
  1,543
  1,681
  1,824
  1,972
  2,127
  2,288
  2,455
Tax expense, $m
  2
  0
  0
  0
  3
  9
  15
  24
  33
  45
  58
  73
  90
  108
  128
  150
  174
  199
  225
  253
  283
  314
  347
  381
  417
  454
  492
  533
  574
  618
  663
Net income, $m
  -33
  -26
  -17
  -5
  8
  23
  42
  64
  90
  121
  157
  198
  243
  292
  347
  406
  469
  537
  609
  685
  766
  850
  938
  1,030
  1,127
  1,227
  1,331
  1,440
  1,553
  1,670
  1,792

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
Total assets, $m
  95
  138
  201
  284
  391
  526
  692
  892
  1,129
  1,404
  1,719
  2,075
  2,472
  2,909
  3,388
  3,906
  4,463
  5,058
  5,691
  6,360
  7,064
  7,804
  8,578
  9,387
  10,231
  11,110
  12,025
  12,975
  13,964
  14,991
  16,058
Adjusted assets (=assets-cash), $m
  92
  138
  201
  284
  391
  526
  692
  892
  1,129
  1,404
  1,719
  2,075
  2,472
  2,909
  3,388
  3,906
  4,463
  5,058
  5,691
  6,360
  7,064
  7,804
  8,578
  9,387
  10,231
  11,110
  12,025
  12,975
  13,964
  14,991
  16,058
Revenue / Adjusted assets
  0.446
  0.449
  0.443
  0.447
  0.445
  0.447
  0.447
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
Average production assets, $m
  68
  102
  148
  210
  289
  389
  512
  660
  835
  1,039
  1,272
  1,535
  1,829
  2,153
  2,507
  2,890
  3,302
  3,743
  4,211
  4,706
  5,227
  5,774
  6,347
  6,946
  7,570
  8,221
  8,897
  9,601
  10,332
  11,092
  11,882
Working capital, $m
  22
  31
  45
  63
  87
  117
  154
  199
  252
  313
  383
  463
  551
  649
  755
  871
  995
  1,128
  1,269
  1,418
  1,575
  1,740
  1,913
  2,093
  2,282
  2,478
  2,681
  2,894
  3,114
  3,343
  3,581
Total debt, $m
  6
  9
  16
  26
  39
  55
  75
  99
  127
  161
  198
  241
  289
  341
  399
  461
  528
  599
  675
  755
  840
  928
  1,021
  1,118
  1,220
  1,325
  1,435
  1,549
  1,668
  1,791
  1,919
Total liabilities, $m
  14
  17
  24
  34
  47
  63
  83
  107
  135
  169
  206
  249
  297
  349
  407
  469
  536
  607
  683
  763
  848
  936
  1,029
  1,126
  1,228
  1,333
  1,443
  1,557
  1,676
  1,799
  1,927
Total equity, $m
  81
  121
  177
  250
  344
  463
  609
  785
  994
  1,236
  1,513
  1,826
  2,175
  2,560
  2,981
  3,437
  3,927
  4,451
  5,008
  5,597
  6,217
  6,867
  7,549
  8,261
  9,004
  9,777
  10,582
  11,418
  12,288
  13,192
  14,131
Total liabilities and equity, $m
  95
  138
  201
  284
  391
  526
  692
  892
  1,129
  1,405
  1,719
  2,075
  2,472
  2,909
  3,388
  3,906
  4,463
  5,058
  5,691
  6,360
  7,065
  7,803
  8,578
  9,387
  10,232
  11,110
  12,025
  12,975
  13,964
  14,991
  16,058
Debt-to-equity ratio
  0.074
  0.070
  0.090
  0.100
  0.110
  0.120
  0.120
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.140
  0.140
  0.140
  0.140
  0.140
  0.140
  0.140
  0.140
  0.140
  0.140
  0.140
Adjusted equity ratio
  0.848
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -33
  -26
  -17
  -5
  8
  23
  42
  64
  90
  121
  157
  198
  243
  292
  347
  406
  469
  537
  609
  685
  766
  850
  938
  1,030
  1,127
  1,227
  1,331
  1,440
  1,553
  1,670
  1,792
Depreciation, amort., depletion, $m
  28
  21
  30
  42
  58
  78
  103
  132
  167
  208
  255
  307
  366
  431
  501
  578
  660
  749
  842
  941
  1,045
  1,155
  1,269
  1,389
  1,514
  1,644
  1,779
  1,920
  2,066
  2,218
  2,376
Funds from operations, $m
  8
  -5
  13
  38
  66
  101
  144
  196
  258
  330
  412
  505
  608
  723
  848
  984
  1,130
  1,285
  1,451
  1,626
  1,811
  2,005
  2,208
  2,420
  2,641
  2,871
  3,111
  3,360
  3,619
  3,888
  4,168
Change in working capital, $m
  5
  10
  14
  19
  24
  30
  37
  45
  53
  61
  70
  79
  88
  98
  107
  116
  124
  133
  141
  149
  157
  165
  173
  180
  188
  196
  204
  212
  220
  229
  238
Cash from operations, $m
  3
  -15
  -1
  19
  43
  71
  107
  152
  205
  268
  342
  425
  520
  625
  741
  868
  1,005
  1,153
  1,310
  1,477
  1,654
  1,840
  2,035
  2,239
  2,453
  2,675
  2,907
  3,148
  3,399
  3,659
  3,930
Maintenance CAPEX, $m
  0
  -14
  -20
  -30
  -42
  -58
  -78
  -102
  -132
  -167
  -208
  -254
  -307
  -366
  -431
  -501
  -578
  -660
  -749
  -842
  -941
  -1,045
  -1,155
  -1,269
  -1,389
  -1,514
  -1,644
  -1,779
  -1,920
  -2,066
  -2,218
New CAPEX, $m
  -1
  -34
  -46
  -62
  -79
  -100
  -123
  -148
  -175
  -204
  -233
  -263
  -294
  -324
  -354
  -383
  -412
  -440
  -468
  -495
  -521
  -547
  -573
  -599
  -624
  -650
  -677
  -704
  -731
  -760
  -790
Cash from investing activities, $m
  4
  -48
  -66
  -92
  -121
  -158
  -201
  -250
  -307
  -371
  -441
  -517
  -601
  -690
  -785
  -884
  -990
  -1,100
  -1,217
  -1,337
  -1,462
  -1,592
  -1,728
  -1,868
  -2,013
  -2,164
  -2,321
  -2,483
  -2,651
  -2,826
  -3,008
Free cash flow, $m
  7
  -63
  -68
  -72
  -79
  -87
  -93
  -99
  -102
  -102
  -99
  -92
  -81
  -64
  -43
  -17
  15
  52
  94
  140
  191
  247
  307
  371
  439
  511
  586
  665
  747
  833
  922
Issuance/(repayment) of debt, $m
  -14
  6
  8
  10
  13
  16
  20
  24
  28
  33
  38
  43
  48
  53
  57
  62
  67
  71
  76
  80
  85
  89
  93
  97
  101
  105
  110
  114
  119
  123
  128
Issuance/(repurchase) of shares, $m
  0
  66
  72
  78
  86
  96
  105
  112
  118
  121
  120
  115
  106
  93
  74
  50
  21
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -7
  72
  80
  88
  99
  112
  125
  136
  146
  154
  158
  158
  154
  146
  131
  112
  88
  71
  76
  80
  85
  89
  93
  97
  101
  105
  110
  114
  119
  123
  128
Total cash flow (excl. dividends), $m
  0
  9
  12
  16
  20
  25
  31
  37
  44
  51
  59
  66
  73
  81
  89
  96
  103
  123
  169
  220
  276
  336
  400
  468
  540
  616
  696
  779
  866
  956
  1,050
Retained Cash Flow (-), $m
  24
  -66
  -72
  -78
  -94
  -119
  -146
  -176
  -208
  -242
  -277
  -313
  -349
  -385
  -421
  -456
  -490
  -524
  -557
  -589
  -620
  -651
  -682
  -712
  -743
  -773
  -805
  -837
  -870
  -904
  -939
Prev. year cash balance 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
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
 
  -57
  -60
  -62
  -74
  -93
  -115
  -139
  -164
  -191
  -219
  -247
  -276
  -304
  -332
  -360
  -387
  -401
  -387
  -368
  -344
  -315
  -281
  -244
  -202
  -157
  -109
  -58
  -4
  52
  111
Discount rate, %
 
  6.10
  6.41
  6.73
  7.06
  7.41
  7.79
  8.17
  8.58
  9.01
  9.46
  9.94
  10.43
  10.95
  11.50
  12.08
  12.68
  13.32
  13.98
  14.68
  15.41
  16.19
  16.99
  17.84
  18.74
  19.67
  20.66
  21.69
  22.77
  23.91
  25.11
PV of cash for distribution, $m
 
  -54
  -53
  -51
  -56
  -65
  -73
  -80
  -85
  -88
  -88
  -87
  -84
  -79
  -72
  -65
  -57
  -48
  -37
  -27
  -20
  -13
  -9
  -6
  -3
  -2
  -1
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  46.2
  25.0
  15.3
  10.3
  7.3
  5.6
  4.4
  3.6
  3.1
  2.7
  2.4
  2.3
  2.1
  2.0
  2.0
  2.0
  2.0
  2.0
  2.0
  2.0
  2.0
  2.0
  2.0
  2.0
  2.0
  2.0
  2.0
  2.0
  2.0
  2.0

Mitcham Industries, Inc. is a provider of equipment to the geophysical, oceanographic and hydrographic industries. The Company operates through two segments. The Equipment Leasing segment is primarily engaged in the leasing of seismic equipment to companies in the oil and gas industry across the world. The Equipment Manufacturing and Sales segment is engaged in the design, production and sale of marine seismic equipment, and oceanographic and hydrographic equipment. Its leasing business includes Mitcham Canada ULC, Seismic Asia Pacific Pty Ltd., Mitcham Seismic Eurasia LLC, Mitcham Europe Ltd. and Mitcham Marine Leasing Pte. Ltd. The Equipment Manufacturing and Sales Segment includes its Seamap International Holdings Pte, Ltd. (Seamap) business and Klein Marine Systems, Inc. (Klein). Seamap designs, manufactures and sells a range of products for the seismic, hydrographic and offshore industries. Klein develops and manufactures high performance side scan sonar systems.

FINANCIAL RATIOS  of  Mitcham Industries (MIND)

Valuation Ratios
P/E Ratio -1.2
Price to Sales 0.9
Price to Book 0.5
Price to Tangible Book
Price to Cash Flow 12.9
Price to Free Cash Flow 19.3
Growth Rates
Sales Growth Rate -21.2%
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 -53.1%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 0%
Total Debt to Equity 7.4%
Interest Coverage -30
Management Effectiveness
Return On Assets -27.8%
Ret/ On Assets - 3 Yr. Avg. -18.8%
Return On Total Capital -31.1%
Ret/ On T. Cap. - 3 Yr. Avg. -20.8%
Return On Equity -35.5%
Return On Equity - 3 Yr. Avg. -24.1%
Asset Turnover 0.4
Profitability Ratios
Gross Margin -17.1%
Gross Margin - 3 Yr. Avg. 5.5%
EBITDA Margin -4.9%
EBITDA Margin - 3 Yr. Avg. 12.4%
Operating Margin -75.6%
Oper. Margin - 3 Yr. Avg. -45.3%
Pre-Tax Margin -75.6%
Pre-Tax Margin - 3 Yr. Avg. -47.2%
Net Profit Margin -80.5%
Net Profit Margin - 3 Yr. Avg. -55.4%
Effective Tax Rate -6.5%
Eff/ Tax Rate - 3 Yr. Avg. -11.9%
Payout Ratio 0%

MIND stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MIND stock intrinsic value calculation we used $41 million for the last fiscal year's total revenue generated by Mitcham Industries. The default revenue input number comes from 2017 income statement of Mitcham Industries. 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 MIND stock valuation model: a) initial revenue growth rate of 50% 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 6.1%, whose default value for MIND is calculated based on our internal credit rating of Mitcham Industries, 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 Mitcham Industries.
    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 MIND stock the variable cost ratio is equal to 63.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $47 million in the base year in the intrinsic value calculation for MIND 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 7.7% for Mitcham Industries.

Corporate tax rate of 27% is the nominal tax rate for Mitcham Industries. 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 MIND 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 MIND are equal to 165.9%.

Life of production assets of 2.6 years is the average useful life of capital assets used in Mitcham Industries 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 MIND 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 - $81 million for Mitcham Industries - 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 12.352 million for Mitcham Industries 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 Mitcham Industries at the current share price and the inputted number of shares is $0.0 billion.

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COMPANY NEWS

▶ /C O R R E C T I O N -- Mitcham Industries, Inc./   [Nov-10  11:00AM  PR Newswire]
Financial statements of MIND
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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