Intrinsic value of Dril-Quip, Inc. - DRQ

Previous Close

$45.11

  Intrinsic Value

$7.25

stock screener

  Rating & Target

str. sell

-84%

Previous close

$45.11

 
Intrinsic value

$7.25

 
Up/down potential

-84%

 
Rating

str. sell

We calculate the intrinsic value of DRQ 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 1.6

 

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, %
  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
  393
  402
  412
  424
  436
  451
  466
  483
  500
  520
  540
  562
  585
  610
  637
  664
  694
  725
  758
  793
  830
  869
  909
  953
  998
  1,046
  1,096
  1,149
  1,204
  1,263
Variable operating expenses, $m
  96
  98
  100
  103
  106
  109
  113
  117
  121
  125
  126
  131
  136
  142
  148
  155
  162
  169
  177
  185
  193
  202
  212
  222
  232
  243
  255
  267
  280
  294
Fixed operating expenses, $m
  432
  442
  452
  461
  472
  482
  493
  503
  515
  526
  537
  549
  561
  574
  586
  599
  612
  626
  640
  654
  668
  683
  698
  713
  729
  745
  761
  778
  795
  813
Total operating expenses, $m
  528
  540
  552
  564
  578
  591
  606
  620
  636
  651
  663
  680
  697
  716
  734
  754
  774
  795
  817
  839
  861
  885
  910
  935
  961
  988
  1,016
  1,045
  1,075
  1,107
Operating income, $m
  -135
  -138
  -140
  -141
  -141
  -141
  -139
  -138
  -135
  -131
  -123
  -118
  -112
  -105
  -98
  -89
  -80
  -69
  -58
  -45
  -31
  -16
  0
  18
  37
  57
  79
  103
  129
  156
EBITDA, $m
  -98
  -100
  -101
  -101
  -100
  -99
  -96
  -93
  -89
  -84
  -78
  -71
  -63
  -55
  -45
  -34
  -22
  -9
  5
  21
  38
  56
  76
  97
  120
  145
  171
  199
  229
  262
Interest expense (income), $m
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  4
  4
  5
  5
  5
  6
  6
  7
  8
  8
  9
  10
  10
  11
Earnings before tax, $m
  -135
  -138
  -140
  -141
  -142
  -141
  -140
  -139
  -136
  -133
  -125
  -120
  -115
  -108
  -101
  -93
  -84
  -74
  -62
  -50
  -37
  -22
  -7
  11
  29
  49
  71
  94
  119
  145
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
  3
  8
  13
  19
  25
  32
  39
Net income, $m
  -135
  -138
  -140
  -141
  -142
  -141
  -140
  -139
  -136
  -133
  -125
  -120
  -115
  -108
  -101
  -93
  -84
  -74
  -62
  -50
  -37
  -22
  -7
  8
  21
  36
  52
  68
  87
  106

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
  875
  895
  918
  944
  972
  1,004
  1,038
  1,075
  1,115
  1,157
  1,203
  1,252
  1,304
  1,359
  1,418
  1,480
  1,546
  1,615
  1,689
  1,766
  1,848
  1,935
  2,026
  2,121
  2,222
  2,329
  2,441
  2,558
  2,682
  2,813
Adjusted assets (=assets-cash), $m
  875
  895
  918
  944
  972
  1,004
  1,038
  1,075
  1,115
  1,157
  1,203
  1,252
  1,304
  1,359
  1,418
  1,480
  1,546
  1,615
  1,689
  1,766
  1,848
  1,935
  2,026
  2,121
  2,222
  2,329
  2,441
  2,558
  2,682
  2,813
Revenue / Adjusted assets
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.448
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
  0.449
Average production assets, $m
  318
  325
  333
  343
  353
  365
  377
  390
  405
  420
  437
  455
  474
  494
  515
  538
  561
  587
  613
  642
  671
  703
  736
  771
  807
  846
  887
  929
  974
  1,022
Working capital, $m
  196
  201
  206
  212
  218
  225
  233
  241
  250
  260
  270
  281
  293
  305
  318
  332
  347
  363
  379
  397
  415
  434
  455
  476
  499
  523
  548
  574
  602
  631
Total debt, $m
  2
  4
  6
  9
  13
  16
  20
  24
  28
  33
  38
  44
  50
  56
  62
  69
  77
  85
  93
  101
  111
  120
  131
  141
  153
  164
  177
  190
  204
  219
Total liabilities, $m
  98
  100
  103
  106
  109
  112
  116
  120
  125
  130
  135
  140
  146
  152
  159
  166
  173
  181
  189
  198
  207
  217
  227
  238
  249
  261
  273
  287
  300
  315
Total equity, $m
  777
  795
  815
  838
  863
  891
  921
  954
  990
  1,028
  1,068
  1,112
  1,158
  1,207
  1,259
  1,314
  1,373
  1,434
  1,500
  1,568
  1,641
  1,718
  1,799
  1,884
  1,974
  2,068
  2,167
  2,272
  2,382
  2,498
Total liabilities and equity, $m
  875
  895
  918
  944
  972
  1,003
  1,037
  1,074
  1,115
  1,158
  1,203
  1,252
  1,304
  1,359
  1,418
  1,480
  1,546
  1,615
  1,689
  1,766
  1,848
  1,935
  2,026
  2,122
  2,223
  2,329
  2,440
  2,559
  2,682
  2,813
Debt-to-equity ratio
  0.000
  0.000
  0.010
  0.010
  0.010
  0.020
  0.020
  0.030
  0.030
  0.030
  0.040
  0.040
  0.040
  0.050
  0.050
  0.050
  0.060
  0.060
  0.060
  0.060
  0.070
  0.070
  0.070
  0.070
  0.080
  0.080
  0.080
  0.080
  0.090
  0.090
Adjusted equity ratio
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -135
  -138
  -140
  -141
  -142
  -141
  -140
  -139
  -136
  -133
  -125
  -120
  -115
  -108
  -101
  -93
  -84
  -74
  -62
  -50
  -37
  -22
  -7
  8
  21
  36
  52
  68
  87
  106
Depreciation, amort., depletion, $m
  37
  38
  39
  40
  41
  42
  43
  45
  46
  48
  45
  47
  49
  51
  53
  55
  58
  60
  63
  66
  69
  72
  76
  79
  83
  87
  91
  96
  100
  105
Funds from operations, $m
  -98
  -100
  -101
  -101
  -101
  -99
  -97
  -94
  -90
  -85
  -80
  -73
  -66
  -57
  -48
  -37
  -26
  -13
  1
  16
  32
  50
  69
  87
  104
  123
  143
  164
  187
  211
Change in working capital, $m
  4
  5
  5
  6
  6
  7
  8
  8
  9
  10
  10
  11
  12
  12
  13
  14
  15
  16
  16
  17
  18
  19
  20
  22
  23
  24
  25
  26
  28
  29
Cash from operations, $m
  -102
  -105
  -106
  -107
  -107
  -106
  -105
  -102
  -99
  -95
  -90
  -84
  -77
  -70
  -61
  -51
  -41
  -29
  -16
  -2
  14
  31
  49
  66
  82
  99
  118
  138
  159
  182
Maintenance CAPEX, $m
  -32
  -33
  -34
  -34
  -35
  -36
  -38
  -39
  -40
  -42
  -43
  -45
  -47
  -49
  -51
  -53
  -55
  -58
  -60
  -63
  -66
  -69
  -72
  -76
  -79
  -83
  -87
  -91
  -96
  -100
New CAPEX, $m
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -47
Cash from investing activities, $m
  -38
  -40
  -42
  -43
  -45
  -47
  -50
  -52
  -54
  -58
  -60
  -63
  -66
  -69
  -72
  -76
  -79
  -83
  -87
  -91
  -96
  -100
  -105
  -111
  -116
  -122
  -128
  -134
  -141
  -147
Free cash flow, $m
  -141
  -145
  -148
  -151
  -153
  -154
  -155
  -155
  -154
  -152
  -150
  -147
  -143
  -139
  -133
  -127
  -120
  -112
  -103
  -93
  -82
  -70
  -57
  -45
  -34
  -23
  -10
  4
  18
  34
Issuance/(repayment) of debt, $m
  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
Issuance/(repurchase) of shares, $m
  152
  156
  160
  164
  167
  169
  171
  171
  172
  171
  165
  163
  161
  157
  153
  148
  142
  135
  128
  119
  110
  99
  87
  77
  68
  59
  48
  36
  23
  10
Cash from financing (excl. dividends), $m  
  154
  158
  163
  167
  170
  173
  175
  175
  176
  176
  170
  168
  167
  163
  160
  155
  149
  143
  136
  128
  119
  109
  97
  88
  79
  71
  61
  49
  37
  25
Total cash flow (excl. dividends), $m
  13
  13
  15
  16
  17
  18
  20
  21
  22
  24
  21
  22
  23
  25
  26
  28
  30
  31
  33
  35
  37
  39
  41
  43
  45
  48
  50
  53
  56
  59
Retained Cash Flow (-), $m
  -152
  -156
  -160
  -164
  -167
  -169
  -171
  -171
  -172
  -171
  -165
  -163
  -161
  -157
  -153
  -148
  -142
  -135
  -128
  -119
  -110
  -99
  -87
  -85
  -90
  -94
  -99
  -105
  -110
  -116
Prev. year cash balance distribution, $m
  336
  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
  197
  -143
  -146
  -148
  -150
  -151
  -151
  -151
  -149
  -147
  -145
  -141
  -137
  -132
  -127
  -120
  -113
  -104
  -95
  -84
  -73
  -60
  -46
  -42
  -44
  -47
  -49
  -52
  -54
  -57
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
  189
  -130
  -127
  -122
  -116
  -109
  -102
  -94
  -86
  -77
  -69
  -60
  -52
  -44
  -37
  -30
  -24
  -19
  -15
  -11
  -8
  -5
  -3
  -2
  -2
  -1
  -1
  -1
  -1
  0
Current shareholders' claim on cash, %
  88.2
  77.8
  68.5
  60.4
  53.3
  47.1
  41.8
  37.1
  33.2
  29.7
  26.8
  24.3
  22.2
  20.3
  18.8
  17.4
  16.2
  15.2
  14.4
  13.6
  13.0
  12.5
  12.1
  11.8
  11.5
  11.3
  11.1
  11.0
  10.9
  10.9

Dril-Quip, Inc. (Dril-Quip) designs, manufactures, sells and services engineered drilling and production equipment. The Company's operations are organized into three geographic segments: Western Hemisphere, including North and South America, headquartered in Houston, Texas; Eastern Hemisphere, including Europe and Africa, headquartered in Aberdeen, Scotland, and Asia-Pacific, including the Pacific Rim, Southeast Asia, Australia, India and the Middle East, headquartered in Singapore. Its equipment is suited for use in deepwater, harsh environments and service applications. Its principal products consist of subsea and surface wellheads, subsea and surface production trees, subsea control systems and manifolds, mudline hanger systems, specialty connectors and associated pipe, drilling and production riser systems, liner hangers, wellhead connectors and diverters. The Company has manufacturing facilities in approximately three of its headquarter locations, as well as in Macae, Brazil.

FINANCIAL RATIOS  of  Dril-Quip, Inc. (DRQ)

Valuation Ratios
P/E Ratio 18.1
Price to Sales 3.1
Price to Book 1.2
Price to Tangible Book
Price to Cash Flow 6.8
Price to Free Cash Flow 7.6
Growth Rates
Sales Growth Rate -36.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -3.7%
Cap. Spend. - 3 Yr. Gr. Rate -9.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0.2
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 6.4%
Ret/ On Assets - 3 Yr. Avg. 11.5%
Return On Total Capital 6.9%
Ret/ On T. Cap. - 3 Yr. Avg. 12.9%
Return On Equity 6.9%
Return On Equity - 3 Yr. Avg. 12.9%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 39%
Gross Margin - 3 Yr. Avg. 43.1%
EBITDA Margin 27.5%
EBITDA Margin - 3 Yr. Avg. 31.3%
Operating Margin 21%
Oper. Margin - 3 Yr. Avg. 26.8%
Pre-Tax Margin 21.5%
Pre-Tax Margin - 3 Yr. Avg. 27%
Net Profit Margin 17.3%
Net Profit Margin - 3 Yr. Avg. 20.8%
Effective Tax Rate 19.8%
Eff/ Tax Rate - 3 Yr. Avg. 22.7%
Payout Ratio 0%

DRQ stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DRQ stock intrinsic value calculation we used $385 million for the last fiscal year's total revenue generated by Dril-Quip, Inc.. The default revenue input number comes from 0001 income statement of Dril-Quip, Inc.. 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 DRQ 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 DRQ is calculated based on our internal credit rating of Dril-Quip, Inc., 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 Dril-Quip, Inc..
    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 DRQ stock the variable cost ratio is equal to 24.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $423 million in the base year in the intrinsic value calculation for DRQ 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 Dril-Quip, Inc..

Corporate tax rate of 27% is the nominal tax rate for Dril-Quip, Inc.. 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 DRQ 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 DRQ are equal to 80.9%.

Life of production assets of 9.7 years is the average useful life of capital assets used in Dril-Quip, Inc. 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 DRQ 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 - $1096.162 million for Dril-Quip, Inc. - 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 36.326 million for Dril-Quip, Inc. 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 Dril-Quip, Inc. at the current share price and the inputted number of shares is $1.6 billion.

RELATED COMPANIES Price Int.Val. Rating
NOV National Oilwe 21.32 47.29  str.buy
FET Forum Energy T 3.45 0.46  str.sell

CONTACT US      

About X-FIN       Privacy policy       Terms of use      

Copyright © X-FIN.com 2005-2019. All rigths reserved.