Intrinsic value of Dorchester Minerals, L.P. - DMLP

Previous Close

$19.20

  Intrinsic Value

$40.93

stock screener

  Rating & Target

str. buy

+113%

Previous close

$19.20

 
Intrinsic value

$40.93

 
Up/down potential

+113%

 
Rating

str. buy

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

Revenue (in 0001), $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 0.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  14.40
  13.46
  12.61
  11.85
  11.17
  10.55
  10.00
  9.50
  9.05
  8.64
  8.28
  7.95
  7.65
  7.39
  7.15
  6.94
  6.74
  6.57
  6.41
  6.27
  6.14
  6.03
  5.93
  5.83
  5.75
  5.67
  5.61
  5.55
  5.49
  5.44
Revenue, $m
  84
  95
  107
  119
  133
  147
  161
  177
  193
  209
  227
  245
  263
  283
  303
  324
  346
  369
  392
  417
  442
  469
  497
  526
  556
  588
  621
  655
  691
  729
Variable operating expenses, $m
  5
  5
  5
  4
  4
  4
  4
  4
  4
  3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
Fixed operating expenses, $m
  15
  16
  16
  16
  17
  17
  17
  18
  18
  19
  19
  19
  20
  20
  21
  21
  22
  22
  23
  23
  24
  24
  25
  25
  26
  26
  27
  28
  28
  29
Total operating expenses, $m
  20
  21
  21
  20
  21
  21
  21
  22
  22
  22
  16
  16
  17
  17
  18
  17
  18
  18
  19
  18
  19
  19
  19
  19
  20
  19
  20
  20
  20
  21
Operating income, $m
  63
  74
  86
  99
  112
  125
  140
  155
  171
  187
  210
  228
  246
  266
  286
  307
  328
  351
  374
  398
  424
  450
  478
  507
  537
  568
  601
  635
  671
  708
EBITDA, $m
  79
  92
  105
  119
  134
  149
  165
  182
  200
  219
  238
  258
  279
  300
  323
  346
  370
  396
  422
  449
  478
  507
  538
  571
  604
  640
  676
  715
  755
  797
Interest expense (income), $m
  0
  0
  -1
  0
  0
  1
  1
  2
  3
  3
  4
  5
  6
  7
  8
  8
  9
  10
  11
  12
  14
  15
  16
  17
  18
  20
  21
  23
  24
  26
  28
Earnings before tax, $m
  63
  75
  86
  98
  111
  124
  138
  152
  167
  183
  205
  222
  240
  258
  277
  297
  318
  339
  362
  385
  409
  434
  461
  488
  517
  547
  578
  611
  645
  681
Tax expense, $m
  17
  20
  23
  27
  30
  33
  37
  41
  45
  49
  55
  60
  65
  70
  75
  80
  86
  92
  98
  104
  110
  117
  124
  132
  140
  148
  156
  165
  174
  184
Net income, $m
  46
  55
  63
  72
  81
  91
  101
  111
  122
  134
  150
  162
  175
  188
  202
  217
  232
  248
  264
  281
  299
  317
  336
  356
  377
  399
  422
  446
  471
  497

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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 assets, $m
  80
  91
  103
  115
  127
  141
  155
  170
  185
  201
  218
  235
  253
  272
  291
  311
  332
  354
  377
  400
  425
  451
  477
  505
  534
  565
  596
  629
  664
  700
Adjusted assets (=assets-cash), $m
  80
  91
  103
  115
  127
  141
  155
  170
  185
  201
  218
  235
  253
  272
  291
  311
  332
  354
  377
  400
  425
  451
  477
  505
  534
  565
  596
  629
  664
  700
Revenue / Adjusted assets
  1.050
  1.044
  1.039
  1.035
  1.047
  1.043
  1.039
  1.041
  1.043
  1.040
  1.041
  1.043
  1.040
  1.040
  1.041
  1.042
  1.042
  1.042
  1.040
  1.043
  1.040
  1.040
  1.042
  1.042
  1.041
  1.041
  1.042
  1.041
  1.041
  1.041
Average production assets, $m
  71
  81
  91
  102
  113
  125
  138
  151
  164
  179
  193
  209
  225
  241
  258
  276
  295
  314
  335
  356
  377
  400
  424
  449
  474
  501
  529
  559
  589
  622
Working capital, $m
  13
  15
  17
  18
  21
  23
  25
  27
  30
  32
  35
  38
  41
  44
  47
  50
  54
  57
  61
  65
  69
  73
  77
  82
  86
  91
  96
  102
  107
  113
Total debt, $m
  -16
  -6
  4
  15
  27
  39
  52
  65
  79
  93
  108
  124
  140
  157
  174
  192
  211
  231
  251
  272
  295
  318
  342
  367
  393
  420
  449
  478
  510
  542
Total liabilities, $m
  72
  82
  92
  103
  115
  127
  139
  153
  167
  181
  196
  211
  228
  245
  262
  280
  299
  319
  339
  360
  383
  406
  430
  455
  481
  508
  537
  566
  597
  630
Total equity, $m
  8
  9
  10
  11
  13
  14
  15
  17
  19
  20
  22
  23
  25
  27
  29
  31
  33
  35
  38
  40
  43
  45
  48
  51
  53
  56
  60
  63
  66
  70
Total liabilities and equity, $m
  80
  91
  102
  114
  128
  141
  154
  170
  186
  201
  218
  234
  253
  272
  291
  311
  332
  354
  377
  400
  426
  451
  478
  506
  534
  564
  597
  629
  663
  700
Debt-to-equity ratio
  -1.960
  -0.660
  0.420
  1.330
  2.100
  2.760
  3.330
  3.820
  4.250
  4.630
  4.960
  5.260
  5.520
  5.760
  5.980
  6.180
  6.350
  6.520
  6.670
  6.800
  6.930
  7.050
  7.160
  7.260
  7.350
  7.440
  7.530
  7.600
  7.680
  7.740
Adjusted equity ratio
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  46
  55
  63
  72
  81
  91
  101
  111
  122
  134
  150
  162
  175
  188
  202
  217
  232
  248
  264
  281
  299
  317
  336
  356
  377
  399
  422
  446
  471
  497
Depreciation, amort., depletion, $m
  16
  17
  19
  20
  22
  24
  25
  27
  29
  31
  28
  30
  32
  34
  37
  39
  42
  45
  48
  51
  54
  57
  61
  64
  68
  72
  76
  80
  84
  89
Funds from operations, $m
  62
  72
  82
  92
  103
  114
  126
  138
  151
  165
  177
  192
  207
  223
  239
  256
  274
  293
  312
  332
  353
  374
  397
  420
  445
  471
  498
  526
  555
  586
Change in working capital, $m
  2
  2
  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
  6
  6
Cash from operations, $m
  61
  71
  80
  90
  101
  112
  124
  136
  149
  162
  175
  189
  204
  220
  236
  253
  271
  289
  308
  328
  349
  370
  393
  416
  440
  466
  493
  520
  549
  580
Maintenance CAPEX, $m
  -9
  -10
  -12
  -13
  -15
  -16
  -18
  -20
  -22
  -23
  -26
  -28
  -30
  -32
  -34
  -37
  -39
  -42
  -45
  -48
  -51
  -54
  -57
  -61
  -64
  -68
  -72
  -76
  -80
  -84
New CAPEX, $m
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
Cash from investing activities, $m
  -18
  -20
  -22
  -24
  -26
  -28
  -31
  -33
  -36
  -37
  -41
  -43
  -46
  -49
  -51
  -55
  -58
  -61
  -65
  -69
  -73
  -77
  -81
  -86
  -90
  -95
  -100
  -105
  -111
  -116
Free cash flow, $m
  43
  51
  58
  66
  75
  84
  93
  103
  114
  125
  134
  146
  158
  171
  184
  198
  213
  228
  243
  259
  276
  293
  312
  331
  351
  371
  393
  415
  439
  464
Issuance/(repayment) of debt, $m
  -16
  10
  10
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  33
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
Cash from financing (excl. dividends), $m  
  -16
  10
  10
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  33
Total cash flow (excl. dividends), $m
  27
  60
  69
  77
  86
  96
  106
  117
  128
  139
  149
  162
  175
  188
  202
  216
  231
  247
  263
  280
  298
  317
  336
  356
  377
  398
  421
  445
  470
  496
Retained Cash Flow (-), $m
  -26
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
Prev. year cash balance distribution, $m
  18
  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
  19
  59
  67
  76
  85
  95
  105
  115
  126
  137
  148
  160
  173
  186
  200
  214
  229
  245
  261
  278
  296
  314
  333
  353
  374
  395
  418
  442
  467
  492
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
  18
  54
  59
  63
  66
  69
  71
  72
  72
  72
  70
  68
  66
  63
  59
  54
  50
  45
  40
  35
  31
  26
  22
  18
  15
  12
  9
  7
  5
  4
Current shareholders' claim on cash, %
  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, L.P. (DMLP)

Valuation Ratios
P/E Ratio 28.1
Price to Sales 15.5
Price to Book 8.8
Price to Tangible Book
Price to Cash Flow 21
Price to Free Cash Flow 21
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 $73 million for the last fiscal year's total revenue generated by Dorchester Minerals, L.P.. The default revenue input number comes from 0001 income statement of Dorchester Minerals, L.P.. 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 14.4% 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 DMLP is calculated based on our internal credit rating of Dorchester Minerals, L.P., 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, L.P..
    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 6.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $15 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 5.4% for Dorchester Minerals, L.P..

Corporate tax rate of 27% is the nominal tax rate for Dorchester Minerals, L.P.. 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 85.3%.

Life of production assets of 7 years is the average useful life of capital assets used in Dorchester Minerals, L.P. 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 15.5%. 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 - $0 million for Dorchester Minerals, L.P. - 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 32.280 million for Dorchester Minerals, L.P. 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, L.P. at the current share price and the inputted number of shares is $0.6 billion.

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