Intrinsic value of Dawson Geophysical Company - DWSN

Previous Close

$2.99

  Intrinsic Value

$0.49

stock screener

  Rating & Target

str. sell

-84%

Previous close

$2.99

 
Intrinsic value

$0.49

 
Up/down potential

-84%

 
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, %
  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
  157
  161
  165
  169
  175
  180
  186
  193
  200
  208
  216
  225
  234
  244
  255
  266
  278
  290
  303
  317
  332
  347
  364
  381
  399
  418
  438
  460
  482
  505
Variable operating expenses, $m
  195
  199
  204
  209
  216
  222
  230
  238
  246
  255
  258
  268
  279
  291
  304
  317
  331
  346
  362
  379
  396
  415
  434
  455
  476
  499
  523
  548
  575
  603
Fixed operating expenses, $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 operating expenses, $m
  195
  199
  204
  209
  216
  222
  230
  238
  246
  255
  258
  268
  279
  291
  304
  317
  331
  346
  362
  379
  396
  415
  434
  455
  476
  499
  523
  548
  575
  603
Operating income, $m
  -38
  -38
  -39
  -40
  -41
  -42
  -43
  -44
  -46
  -47
  -42
  -43
  -45
  -47
  -49
  -51
  -54
  -56
  -59
  -61
  -64
  -67
  -70
  -74
  -77
  -81
  -85
  -89
  -93
  -98
EBITDA, $m
  -14
  -15
  -15
  -15
  -16
  -16
  -17
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -33
  -34
  -36
  -38
  -40
  -41
  -43
  -46
Interest expense (income), $m
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
Earnings before tax, $m
  -38
  -39
  -40
  -41
  -42
  -43
  -44
  -46
  -47
  -48
  -43
  -45
  -47
  -49
  -51
  -53
  -55
  -58
  -61
  -63
  -66
  -70
  -73
  -76
  -80
  -84
  -88
  -92
  -97
  -101
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
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  -38
  -39
  -40
  -41
  -42
  -43
  -44
  -46
  -47
  -48
  -43
  -45
  -47
  -49
  -51
  -53
  -55
  -58
  -61
  -63
  -66
  -70
  -73
  -76
  -80
  -84
  -88
  -92
  -97
  -101

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
  135
  138
  141
  145
  150
  154
  160
  165
  172
  178
  185
  193
  201
  209
  218
  228
  238
  249
  260
  272
  284
  298
  312
  326
  342
  358
  376
  394
  413
  433
Adjusted assets (=assets-cash), $m
  135
  138
  141
  145
  150
  154
  160
  165
  172
  178
  185
  193
  201
  209
  218
  228
  238
  249
  260
  272
  284
  298
  312
  326
  342
  358
  376
  394
  413
  433
Revenue / Adjusted assets
  1.163
  1.167
  1.170
  1.166
  1.167
  1.169
  1.163
  1.170
  1.163
  1.169
  1.168
  1.166
  1.164
  1.167
  1.170
  1.167
  1.168
  1.165
  1.165
  1.165
  1.169
  1.164
  1.167
  1.169
  1.167
  1.168
  1.165
  1.168
  1.167
  1.166
Average production assets, $m
  81
  83
  85
  87
  90
  93
  96
  99
  103
  107
  111
  116
  121
  126
  131
  137
  143
  149
  156
  163
  171
  179
  187
  196
  206
  215
  226
  237
  248
  260
Working capital, $m
  17
  18
  18
  19
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  35
  37
  39
  40
  42
  44
  46
  49
  51
  53
  56
Total debt, $m
  13
  14
  15
  16
  16
  17
  19
  20
  21
  22
  24
  25
  27
  29
  31
  32
  35
  37
  39
  42
  44
  47
  50
  53
  56
  59
  63
  67
  70
  75
Total liabilities, $m
  28
  28
  29
  30
  31
  32
  33
  34
  35
  37
  38
  39
  41
  43
  45
  47
  49
  51
  53
  56
  58
  61
  64
  67
  70
  73
  77
  81
  85
  89
Total equity, $m
  107
  109
  112
  115
  119
  123
  127
  131
  136
  142
  147
  153
  160
  166
  173
  181
  189
  198
  207
  216
  226
  237
  248
  260
  272
  285
  299
  313
  328
  344
Total liabilities and equity, $m
  135
  137
  141
  145
  150
  155
  160
  165
  171
  179
  185
  192
  201
  209
  218
  228
  238
  249
  260
  272
  284
  298
  312
  327
  342
  358
  376
  394
  413
  433
Debt-to-equity ratio
  0.130
  0.130
  0.130
  0.130
  0.140
  0.140
  0.150
  0.150
  0.150
  0.160
  0.160
  0.170
  0.170
  0.170
  0.180
  0.180
  0.180
  0.190
  0.190
  0.190
  0.200
  0.200
  0.200
  0.200
  0.210
  0.210
  0.210
  0.210
  0.210
  0.220
Adjusted equity ratio
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -38
  -39
  -40
  -41
  -42
  -43
  -44
  -46
  -47
  -48
  -43
  -45
  -47
  -49
  -51
  -53
  -55
  -58
  -61
  -63
  -66
  -70
  -73
  -76
  -80
  -84
  -88
  -92
  -97
  -101
Depreciation, amort., depletion, $m
  23
  24
  24
  25
  25
  26
  26
  27
  28
  29
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  34
  36
  37
  39
  41
  43
  45
  47
  50
  52
Funds from operations, $m
  -15
  -15
  -16
  -16
  -17
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -22
  -23
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -49
Change in working capital, $m
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
Cash from operations, $m
  -15
  -16
  -16
  -17
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -50
  -52
Maintenance CAPEX, $m
  -16
  -16
  -17
  -17
  -17
  -18
  -19
  -19
  -20
  -21
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -47
  -50
New CAPEX, $m
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
Cash from investing activities, $m
  -18
  -18
  -19
  -19
  -20
  -21
  -22
  -22
  -24
  -25
  -25
  -27
  -28
  -29
  -30
  -32
  -33
  -35
  -37
  -38
  -41
  -42
  -44
  -46
  -48
  -51
  -53
  -56
  -58
  -62
Free cash flow, $m
  -33
  -34
  -35
  -36
  -37
  -39
  -40
  -42
  -43
  -45
  -47
  -49
  -52
  -54
  -56
  -59
  -62
  -64
  -67
  -71
  -74
  -78
  -81
  -85
  -89
  -94
  -98
  -103
  -108
  -114
Issuance/(repayment) of debt, $m
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
Issuance/(repurchase) of shares, $m
  40
  41
  43
  44
  45
  47
  48
  50
  52
  54
  49
  51
  53
  55
  58
  61
  63
  66
  70
  73
  76
  80
  84
  88
  92
  97
  102
  107
  112
  117
Cash from financing (excl. dividends), $m  
  41
  42
  44
  45
  46
  48
  49
  51
  53
  55
  50
  53
  55
  57
  60
  63
  65
  68
  72
  75
  79
  83
  87
  91
  95
  100
  106
  111
  116
  121
Total cash flow (excl. dividends), $m
  8
  8
  9
  9
  9
  9
  9
  9
  10
  10
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
Retained Cash Flow (-), $m
  -40
  -41
  -43
  -44
  -45
  -47
  -48
  -50
  -52
  -54
  -49
  -51
  -53
  -55
  -58
  -61
  -63
  -66
  -70
  -73
  -76
  -80
  -84
  -88
  -92
  -97
  -102
  -107
  -112
  -117
Prev. year cash balance distribution, $m
  12
  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
  -20
  -33
  -34
  -35
  -36
  -38
  -39
  -41
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -57
  -60
  -62
  -65
  -68
  -71
  -75
  -79
  -82
  -86
  -90
  -95
  -100
  -104
  -110
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
  -19
  -30
  -30
  -29
  -28
  -27
  -26
  -25
  -24
  -23
  -22
  -20
  -19
  -17
  -16
  -14
  -13
  -11
  -10
  -9
  -7
  -6
  -5
  -4
  -3
  -3
  -2
  -2
  -1
  -1
Current shareholders' claim on cash, %
  64.6
  41.6
  26.7
  17.1
  11.0
  7.0
  4.5
  2.9
  1.8
  1.2
  0.8
  0.5
  0.4
  0.2
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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 Company (DWSN)

Valuation Ratios
P/E Ratio -1.6
Price to Sales 0.5
Price to Book 0.4
Price to Tangible Book
Price to Cash Flow 7.2
Price to Free Cash Flow 64.9
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 $154 million for the last fiscal year's total revenue generated by Dawson Geophysical Company. The default revenue input number comes from 0001 income statement of Dawson Geophysical Company. 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 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 DWSN is calculated based on our internal credit rating of Dawson Geophysical Company, 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 Company.
    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 124%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 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 Company.

Corporate tax rate of 27% is the nominal tax rate for Dawson Geophysical Company. 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 51.5%.

Life of production assets of 2.7 years is the average useful life of capital assets used in Dawson Geophysical Company 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 11.1%. 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 - $117.016 million for Dawson Geophysical Company - 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 23.143 million for Dawson Geophysical Company 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 Company at the current share price and the inputted number of shares is $0.1 billion.

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