Intrinsic value of Dawson Geophysical - DWSN

Previous Close

$7.61

  Intrinsic Value

$7.02

stock screener

  Rating & Target

hold

-8%

Previous close

$7.61

 
Intrinsic value

$7.02

 
Up/down potential

-8%

 
Rating

hold

We calculate the intrinsic value of DWSN 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 0.2

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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, %
  17.90
  16.61
  15.45
  14.40
  13.46
  12.62
  11.86
  11.17
  10.55
  10.00
  9.50
  9.05
  8.64
  8.28
  7.95
  7.66
  7.39
  7.15
  6.94
  6.74
  6.57
  6.41
  6.27
  6.14
  6.03
  5.93
  5.83
  5.75
  5.68
  5.61
Revenue, $m
  185
  216
  249
  285
  323
  364
  407
  453
  501
  551
  603
  658
  715
  774
  835
  899
  966
  1,035
  1,107
  1,181
  1,259
  1,339
  1,423
  1,511
  1,602
  1,697
  1,796
  1,899
  2,007
  2,119
Variable operating expenses, $m
  92
  107
  124
  141
  160
  181
  202
  225
  248
  273
  299
  326
  354
  384
  414
  446
  479
  513
  549
  586
  624
  664
  706
  749
  795
  842
  891
  942
  995
  1,051
Fixed operating expenses, $m
  123
  125
  128
  131
  134
  137
  140
  143
  146
  149
  152
  156
  159
  163
  166
  170
  174
  178
  181
  185
  190
  194
  198
  202
  207
  211
  216
  221
  226
  231
Total operating expenses, $m
  215
  232
  252
  272
  294
  318
  342
  368
  394
  422
  451
  482
  513
  547
  580
  616
  653
  691
  730
  771
  814
  858
  904
  951
  1,002
  1,053
  1,107
  1,163
  1,221
  1,282
Operating income, $m
  -29
  -17
  -3
  13
  29
  47
  66
  85
  106
  128
  152
  176
  201
  227
  255
  283
  313
  344
  376
  410
  445
  481
  519
  559
  601
  644
  689
  736
  786
  838
EBITDA, $m
  -18
  -3
  13
  31
  50
  70
  91
  114
  138
  163
  190
  217
  246
  276
  307
  340
  374
  409
  446
  484
  524
  566
  609
  655
  702
  751
  802
  856
  913
  971
Interest expense (income), $m
  0
  0
  0
  1
  1
  1
  1
  2
  2
  2
  3
  3
  4
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
  12
  12
  13
  14
Earnings before tax, $m
  -30
  -17
  -3
  12
  28
  45
  64
  83
  104
  126
  148
  172
  197
  223
  250
  278
  307
  338
  370
  403
  437
  473
  511
  550
  590
  633
  678
  724
  773
  824
Tax expense, $m
  0
  0
  0
  3
  8
  12
  17
  23
  28
  34
  40
  46
  53
  60
  67
  75
  83
  91
  100
  109
  118
  128
  138
  148
  159
  171
  183
  196
  209
  222
Net income, $m
  -30
  -17
  -3
  9
  20
  33
  47
  61
  76
  92
  108
  126
  144
  163
  182
  203
  224
  247
  270
  294
  319
  345
  373
  401
  431
  462
  495
  529
  564
  601

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
  169
  197
  228
  261
  296
  333
  373
  414
  458
  504
  552
  602
  654
  708
  764
  823
  884
  947
  1,012
  1,081
  1,152
  1,225
  1,302
  1,382
  1,466
  1,553
  1,643
  1,738
  1,836
  1,939
Adjusted assets (=assets-cash), $m
  169
  197
  228
  261
  296
  333
  373
  414
  458
  504
  552
  602
  654
  708
  764
  823
  884
  947
  1,012
  1,081
  1,152
  1,225
  1,302
  1,382
  1,466
  1,553
  1,643
  1,738
  1,836
  1,939
Revenue / Adjusted assets
  1.095
  1.096
  1.092
  1.092
  1.091
  1.093
  1.091
  1.094
  1.094
  1.093
  1.092
  1.093
  1.093
  1.093
  1.093
  1.092
  1.093
  1.093
  1.094
  1.093
  1.093
  1.093
  1.093
  1.093
  1.093
  1.093
  1.093
  1.093
  1.093
  1.093
Average production assets, $m
  117
  136
  157
  180
  204
  230
  257
  286
  316
  348
  381
  415
  451
  488
  527
  567
  609
  653
  698
  745
  794
  845
  898
  953
  1,011
  1,071
  1,133
  1,198
  1,266
  1,337
Working capital, $m
  -7
  -8
  -9
  -11
  -12
  -14
  -15
  -17
  -19
  -21
  -23
  -25
  -27
  -29
  -32
  -34
  -37
  -39
  -42
  -45
  -48
  -51
  -54
  -57
  -61
  -64
  -68
  -72
  -76
  -81
Total debt, $m
  9
  13
  17
  22
  27
  33
  39
  45
  51
  58
  65
  73
  80
  88
  97
  105
  114
  124
  133
  144
  154
  165
  176
  188
  201
  213
  227
  241
  255
  271
Total liabilities, $m
  25
  29
  34
  39
  44
  49
  55
  61
  68
  75
  82
  89
  97
  105
  113
  122
  131
  140
  150
  160
  170
  181
  193
  205
  217
  230
  243
  257
  272
  287
Total equity, $m
  144
  168
  194
  222
  252
  284
  318
  353
  390
  429
  470
  513
  557
  603
  651
  701
  753
  807
  863
  921
  981
  1,044
  1,110
  1,178
  1,249
  1,323
  1,400
  1,480
  1,564
  1,652
Total liabilities and equity, $m
  169
  197
  228
  261
  296
  333
  373
  414
  458
  504
  552
  602
  654
  708
  764
  823
  884
  947
  1,013
  1,081
  1,151
  1,225
  1,303
  1,383
  1,466
  1,553
  1,643
  1,737
  1,836
  1,939
Debt-to-equity ratio
  0.060
  0.080
  0.090
  0.100
  0.110
  0.120
  0.120
  0.130
  0.130
  0.140
  0.140
  0.140
  0.140
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.160
  0.160
  0.160
  0.160
  0.160
  0.160
  0.160
  0.160
  0.160
  0.160
  0.160
Adjusted equity ratio
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852
  0.852

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -30
  -17
  -3
  9
  20
  33
  47
  61
  76
  92
  108
  126
  144
  163
  182
  203
  224
  247
  270
  294
  319
  345
  373
  401
  431
  462
  495
  529
  564
  601
Depreciation, amort., depletion, $m
  12
  14
  16
  18
  20
  23
  26
  29
  32
  35
  38
  42
  45
  49
  53
  57
  61
  65
  70
  75
  79
  85
  90
  95
  101
  107
  113
  120
  127
  134
Funds from operations, $m
  -18
  -3
  13
  27
  41
  56
  72
  89
  108
  127
  146
  167
  189
  212
  235
  260
  285
  312
  340
  368
  399
  430
  463
  497
  532
  569
  608
  649
  691
  735
Change in working capital, $m
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
Cash from operations, $m
  -17
  -2
  14
  28
  42
  58
  74
  91
  109
  128
  148
  169
  191
  214
  237
  262
  288
  315
  342
  371
  401
  433
  466
  500
  536
  573
  612
  652
  695
  739
Maintenance CAPEX, $m
  -10
  -12
  -14
  -16
  -18
  -20
  -23
  -26
  -29
  -32
  -35
  -38
  -42
  -45
  -49
  -53
  -57
  -61
  -65
  -70
  -75
  -79
  -85
  -90
  -95
  -101
  -107
  -113
  -120
  -127
New CAPEX, $m
  -18
  -19
  -21
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -33
  -34
  -36
  -37
  -39
  -40
  -42
  -44
  -45
  -47
  -49
  -51
  -53
  -55
  -57
  -60
  -62
  -65
  -68
  -71
Cash from investing activities, $m
  -28
  -31
  -35
  -39
  -42
  -46
  -50
  -55
  -59
  -64
  -68
  -72
  -78
  -82
  -88
  -93
  -99
  -105
  -110
  -117
  -124
  -130
  -138
  -145
  -152
  -161
  -169
  -178
  -188
  -198
Free cash flow, $m
  -44
  -33
  -21
  -10
  0
  12
  24
  37
  51
  65
  81
  97
  114
  131
  150
  169
  189
  210
  232
  254
  278
  303
  328
  355
  383
  412
  442
  474
  507
  542
Issuance/(repayment) of debt, $m
  4
  4
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  11
  12
  12
  13
  13
  14
  15
  15
Issuance/(repurchase) of shares, $m
  52
  41
  29
  19
  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
Cash from financing (excl. dividends), $m  
  56
  45
  34
  24
  14
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  11
  12
  12
  13
  13
  14
  15
  15
Total cash flow (excl. dividends), $m
  11
  12
  13
  14
  15
  17
  30
  43
  57
  72
  88
  104
  121
  139
  158
  178
  198
  219
  241
  265
  289
  314
  340
  367
  395
  425
  456
  488
  522
  557
Retained Cash Flow (-), $m
  -52
  -41
  -29
  -28
  -30
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -58
  -60
  -63
  -65
  -68
  -71
  -74
  -77
  -80
  -84
  -88
Prev. year cash balance distribution, $m
  19
  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
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
Cash available for distribution, $m
  -22
  -29
  -16
  -14
  -15
  -15
  -4
  7
  20
  33
  47
  62
  77
  93
  110
  128
  146
  166
  186
  206
  228
  251
  274
  299
  324
  351
  378
  407
  438
  469
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
  -21
  -27
  -14
  -12
  -12
  -11
  -3
  5
  11
  17
  22
  26
  29
  31
  32
  32
  32
  30
  29
  26
  24
  21
  18
  15
  13
  10
  8
  6
  5
  4
Current shareholders' claim on cash, %
  73.7
  59.5
  51.9
  47.9
  46.2
  46.2
  46.2
  46.2
  46.2
  46.2
  46.2
  46.2
  46.2
  46.2
  46.2
  46.2
  46.2
  46.2
  46.2
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Dawson Geophysical Company, formerly TGC Industries, Inc., is a provider of onshore seismic data acquisition and processing services with operations throughout the United States and Canada. The Company acquires and processes two-dimensional (2-D), three-dimensional (3-D) and multi-component seismic data for its clients, ranging from oil and gas companies to independent oil and gas operators, as well as providers of multi-client data libraries. It operates through contract seismic data acquisition and processing services segment. It operates approximately 10 seismic crews, consisting of over eight crews in the United States and approximately two crews in Canada, and a seismic data processing center. It owns equipment for over 20 land-based seismic data acquisition crews, approximately 220 vibrator energy source units, over 248,000 recording channels and approximately 20 central recording systems.

FINANCIAL RATIOS  of  Dawson Geophysical (DWSN)

Valuation Ratios
P/E Ratio -4.1
Price to Sales 1.2
Price to Book 1
Price to Tangible Book
Price to Cash Flow 18.3
Price to Free Cash Flow 165.1
Growth Rates
Sales Growth Rate -43.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 14.3%
Cap. Spend. - 3 Yr. Gr. Rate 32%
Financial Strength
Quick Ratio 28
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 1.2%
Interest Coverage 0
Management Effectiveness
Return On Assets -18.3%
Ret/ On Assets - 3 Yr. Avg. -11.3%
Return On Total Capital -20.3%
Ret/ On T. Cap. - 3 Yr. Avg. -13.1%
Return On Equity -21%
Return On Equity - 3 Yr. Avg. -13.8%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 4.8%
EBITDA Margin -1.5%
EBITDA Margin - 3 Yr. Avg. 2.3%
Operating Margin -37.6%
Oper. Margin - 3 Yr. Avg. -21.8%
Pre-Tax Margin -34.6%
Pre-Tax Margin - 3 Yr. Avg. -21.1%
Net Profit Margin -30.1%
Net Profit Margin - 3 Yr. Avg. -16.5%
Effective Tax Rate 13%
Eff/ Tax Rate - 3 Yr. Avg. 25.5%
Payout Ratio 0%

DWSN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DWSN stock intrinsic value calculation we used $157 million for the last fiscal year's total revenue generated by Dawson Geophysical. The default revenue input number comes from 2017 income statement of Dawson Geophysical. 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 DWSN stock valuation model: a) initial revenue growth rate of 17.9% 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 DWSN is calculated based on our internal credit rating of Dawson Geophysical, 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 Dawson Geophysical.
    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 DWSN stock the variable cost ratio is equal to 49.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $120 million in the base year in the intrinsic value calculation for DWSN 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 Dawson Geophysical.

Corporate tax rate of 27% is the nominal tax rate for Dawson Geophysical. 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 DWSN stock is equal to 0.6%.

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 DWSN are equal to 63.1%.

Life of production assets of 10 years is the average useful life of capital assets used in Dawson Geophysical 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 DWSN is equal to -3.8%. 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 - $141 million for Dawson Geophysical - 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 22 million for Dawson Geophysical 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 Dawson Geophysical at the current share price and the inputted number of shares is $0.2 billion.

RELATED COMPANIES Price Int.Val. Rating

COMPANY NEWS

▶ Why Dawson Geophysical Still Has Work to Do   [May-03-18 03:17PM  Motley Fool]
▶ Dawson Geophysical: 1Q Earnings Snapshot   [06:16AM  Associated Press]
▶ Dawson Geophysical reports 4Q loss   [06:25AM  Associated Press]
▶ Dawson Geophysical Starts Making Progress   [Nov-04-17 11:23AM  Motley Fool]
▶ Is It The Right Time To Buy Dawson Geophysical Company (DWSN)?   [Nov-02-17 04:22PM  Simply Wall St.]
▶ Dawson Geophysical reports 3Q loss   [06:24AM  Associated Press]
▶ Oilfield Services Gainers: FTK, KEG, BAS, DWSN, and AROC   [Oct-04-17 01:36PM  Market Realist]
▶ Dawson Geophysical reports 2Q loss   [Aug-04-17 02:29AM  Associated Press]
▶ Dawson Geophysical reports 2Q loss   [06:22AM  Associated Press]
▶ 3 Energy Stocks to Buy at the Bottom of the Cycle   [Aug-01-17 07:32AM  Motley Fool]
▶ Dawson Geophysical Hopes for Better Times Ahead   [May-06-17 06:31PM  Motley Fool]
▶ Dawson Geophysical reports 1Q loss   [06:14AM  Associated Press]
▶ Dawson Geophysical reports 4Q loss   [06:15AM  Associated Press]
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