Intrinsic value of Dawson Geophysical - DWSN

Previous Close

$4.57

  Intrinsic Value

$1.54

stock screener

  Rating & Target

str. sell

-66%

Previous close

$4.57

 
Intrinsic value

$1.54

 
Up/down potential

-66%

 
Rating

str. sell

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 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 0.1

 

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, %
  14.30
  13.37
  12.53
  11.78
  11.10
  10.49
  9.94
  9.45
  9.00
  8.60
  8.24
  7.92
  7.63
  7.36
  7.13
  6.91
  6.72
  6.55
  6.40
  6.26
  6.13
  6.02
  5.92
  5.82
  5.74
  5.67
  5.60
  5.54
  5.49
  5.44
Revenue, $m
  180
  204
  229
  256
  285
  314
  346
  378
  412
  448
  485
  523
  563
  605
  648
  692
  739
  787
  838
  890
  945
  1,002
  1,061
  1,123
  1,187
  1,254
  1,325
  1,398
  1,475
  1,555
Variable operating expenses, $m
  89
  101
  114
  127
  141
  156
  172
  188
  205
  223
  241
  260
  280
  300
  322
  344
  367
  391
  416
  442
  469
  498
  527
  558
  590
  623
  658
  694
  733
  772
Fixed operating expenses, $m
  122
  124
  127
  130
  133
  136
  139
  142
  145
  148
  151
  155
  158
  161
  165
  169
  172
  176
  180
  184
  188
  192
  196
  201
  205
  210
  214
  219
  224
  229
Total operating expenses, $m
  211
  225
  241
  257
  274
  292
  311
  330
  350
  371
  392
  415
  438
  461
  487
  513
  539
  567
  596
  626
  657
  690
  723
  759
  795
  833
  872
  913
  957
  1,001
Operating income, $m
  -31
  -22
  -12
  -1
  11
  23
  35
  49
  63
  77
  93
  109
  126
  143
  161
  180
  200
  220
  242
  264
  288
  312
  338
  364
  392
  422
  453
  485
  519
  554
EBITDA, $m
  -9
  4
  17
  31
  46
  62
  79
  97
  115
  134
  154
  175
  197
  219
  243
  267
  293
  320
  347
  377
  407
  438
  472
  506
  542
  580
  620
  661
  705
  750
Interest expense (income), $m
  0
  0
  1
  1
  1
  1
  1
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
Earnings before tax, $m
  -32
  -22
  -13
  -2
  9
  21
  34
  47
  61
  75
  90
  106
  122
  139
  157
  176
  195
  215
  236
  258
  281
  305
  330
  357
  384
  413
  443
  475
  508
  543
Tax expense, $m
  0
  0
  0
  0
  3
  6
  9
  13
  16
  20
  24
  29
  33
  38
  42
  47
  53
  58
  64
  70
  76
  82
  89
  96
  104
  112
  120
  128
  137
  147
Net income, $m
  -32
  -22
  -13
  -2
  7
  15
  25
  34
  44
  55
  66
  77
  89
  102
  115
  128
  142
  157
  172
  188
  205
  223
  241
  260
  280
  301
  324
  347
  371
  396

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
  167
  190
  214
  239
  265
  293
  322
  353
  384
  417
  452
  488
  525
  563
  604
  645
  689
  734
  781
  830
  881
  934
  989
  1,046
  1,106
  1,169
  1,235
  1,303
  1,375
  1,449
Adjusted assets (=assets-cash), $m
  167
  190
  214
  239
  265
  293
  322
  353
  384
  417
  452
  488
  525
  563
  604
  645
  689
  734
  781
  830
  881
  934
  989
  1,046
  1,106
  1,169
  1,235
  1,303
  1,375
  1,449
Revenue / Adjusted assets
  1.078
  1.074
  1.070
  1.071
  1.075
  1.072
  1.075
  1.071
  1.073
  1.074
  1.073
  1.072
  1.072
  1.075
  1.073
  1.073
  1.073
  1.072
  1.073
  1.072
  1.073
  1.073
  1.073
  1.074
  1.073
  1.073
  1.073
  1.073
  1.073
  1.073
Average production assets, $m
  113
  128
  145
  162
  180
  198
  218
  239
  260
  283
  306
  330
  355
  382
  409
  437
  466
  497
  529
  562
  596
  632
  669
  708
  749
  792
  836
  882
  931
  981
Working capital, $m
  26
  30
  33
  37
  41
  46
  50
  55
  60
  65
  70
  76
  82
  88
  94
  100
  107
  114
  121
  129
  137
  145
  154
  163
  172
  182
  192
  203
  214
  225
Total debt, $m
  11
  15
  19
  23
  27
  32
  36
  41
  47
  52
  58
  63
  70
  76
  82
  89
  96
  104
  111
  119
  128
  136
  145
  155
  164
  175
  185
  196
  208
  220
Total liabilities, $m
  27
  31
  35
  39
  43
  48
  53
  57
  63
  68
  74
  79
  86
  92
  98
  105
  112
  120
  127
  135
  144
  152
  161
  171
  180
  191
  201
  212
  224
  236
Total equity, $m
  140
  159
  179
  200
  222
  245
  270
  295
  322
  349
  378
  408
  439
  472
  505
  540
  576
  614
  654
  694
  737
  781
  828
  876
  926
  979
  1,033
  1,091
  1,150
  1,213
Total liabilities and equity, $m
  167
  190
  214
  239
  265
  293
  323
  352
  385
  417
  452
  487
  525
  564
  603
  645
  688
  734
  781
  829
  881
  933
  989
  1,047
  1,106
  1,170
  1,234
  1,303
  1,374
  1,449
Debt-to-equity ratio
  0.080
  0.090
  0.110
  0.110
  0.120
  0.130
  0.140
  0.140
  0.140
  0.150
  0.150
  0.160
  0.160
  0.160
  0.160
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
Adjusted equity ratio
  0.837
  0.837
  0.837
  0.837
  0.837
  0.837
  0.837
  0.837
  0.837
  0.837
  0.837
  0.837
  0.837
  0.837
  0.837
  0.837
  0.837
  0.837
  0.837
  0.837
  0.837
  0.837
  0.837
  0.837
  0.837
  0.837
  0.837
  0.837
  0.837
  0.837

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -32
  -22
  -13
  -2
  7
  15
  25
  34
  44
  55
  66
  77
  89
  102
  115
  128
  142
  157
  172
  188
  205
  223
  241
  260
  280
  301
  324
  347
  371
  396
Depreciation, amort., depletion, $m
  23
  26
  29
  32
  36
  40
  44
  48
  52
  57
  61
  66
  71
  76
  82
  87
  93
  99
  106
  112
  119
  126
  134
  142
  150
  158
  167
  176
  186
  196
Funds from operations, $m
  -9
  3
  16
  30
  43
  55
  68
  82
  96
  111
  127
  143
  160
  178
  196
  216
  236
  256
  278
  301
  324
  349
  375
  402
  430
  460
  491
  523
  557
  593
Change in working capital, $m
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
Cash from operations, $m
  -12
  0
  13
  26
  39
  51
  64
  77
  91
  106
  122
  138
  154
  172
  190
  209
  229
  249
  271
  293
  317
  341
  366
  393
  421
  450
  481
  512
  546
  581
Maintenance CAPEX, $m
  -20
  -23
  -26
  -29
  -32
  -36
  -40
  -44
  -48
  -52
  -57
  -61
  -66
  -71
  -76
  -82
  -87
  -93
  -99
  -106
  -112
  -119
  -126
  -134
  -142
  -150
  -158
  -167
  -176
  -186
New CAPEX, $m
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -33
  -34
  -36
  -37
  -39
  -41
  -42
  -44
  -46
  -48
  -51
Cash from investing activities, $m
  -34
  -38
  -42
  -46
  -50
  -55
  -60
  -65
  -69
  -74
  -80
  -85
  -91
  -97
  -103
  -110
  -116
  -124
  -131
  -139
  -146
  -155
  -163
  -173
  -183
  -192
  -202
  -213
  -224
  -237
Free cash flow, $m
  -46
  -38
  -29
  -19
  -12
  -4
  4
  13
  22
  32
  42
  52
  63
  75
  87
  99
  112
  126
  140
  154
  170
  186
  203
  220
  239
  258
  278
  299
  321
  344
Issuance/(repayment) of debt, $m
  3
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
Issuance/(repurchase) of shares, $m
  49
  41
  32
  23
  15
  8
  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  
  52
  45
  36
  27
  19
  13
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
Total cash flow (excl. dividends), $m
  6
  7
  7
  8
  8
  8
  9
  18
  27
  37
  47
  58
  69
  81
  93
  106
  119
  133
  147
  162
  178
  194
  212
  230
  248
  268
  289
  310
  333
  356
Retained Cash Flow (-), $m
  -49
  -41
  -32
  -23
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -30
  -31
  -32
  -34
  -35
  -36
  -38
  -39
  -41
  -43
  -44
  -46
  -48
  -50
  -52
  -55
  -57
  -60
  -63
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
  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
  -24
  -34
  -25
  -15
  -14
  -15
  -15
  -8
  1
  9
  19
  28
  38
  49
  60
  71
  83
  95
  108
  121
  136
  150
  165
  181
  198
  215
  234
  253
  273
  294
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
  -23
  -31
  -22
  -13
  -11
  -11
  -10
  -5
  0
  5
  9
  12
  15
  16
  17
  18
  18
  18
  17
  15
  14
  12
  11
  9
  8
  6
  5
  4
  3
  2
Current shareholders' claim on cash, %
  64.8
  46.4
  36.4
  31.0
  28.1
  26.8
  26.8
  26.8
  26.8
  26.8
  26.8
  26.8
  26.8
  26.8
  26.8
  26.8
  26.8
  26.8
  26.8
  26.8
  26.8
  26.8
  26.8
  26.8
  26.8
  26.8
  26.8
  26.8
  26.8
  26.8

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 -2.5
Price to Sales 0.7
Price to Book 0.6
Price to Tangible Book
Price to Cash Flow 11
Price to Free Cash Flow 99.2
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 $157.148 million for the last fiscal year's total revenue generated by Dawson Geophysical. The default revenue input number comes from 0001 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 14.3% 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 49.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $119 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%.

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 2.5 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 14.5%. 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 - $141.318 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 22.921 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 $0.1 billion.

RELATED COMPANIES Price Int.Val. Rating

COMPANY NEWS

▶ Dawson Geophysical: 3Q Earnings Snapshot   [Nov-01-18 06:41AM  Associated Press]
▶ Dawson Geophysical: 2Q Earnings Snapshot   [06:15AM  Associated Press]
▶ 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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