Intrinsic value of Geospace Technologies - GEOS

Previous Close

$14.10

  Intrinsic Value

$4.54

stock screener

  Rating & Target

str. sell

-68%

Previous close

$14.10

 
Intrinsic value

$4.54

 
Up/down potential

-68%

 
Rating

str. sell

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of GEOS 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 2016), $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
2016(a)
   2017
   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

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -27.06
  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
  62
  63
  65
  66
  68
  70
  73
  75
  78
  81
  84
  87
  91
  94
  98
  103
  107
  112
  117
  122
  128
  134
  140
  146
  153
  161
  168
  176
  185
  194
  203
Variable operating expenses, $m
 
  52
  53
  55
  56
  58
  60
  62
  64
  66
  69
  72
  74
  78
  81
  84
  88
  92
  96
  100
  105
  110
  115
  121
  126
  132
  139
  145
  152
  160
  167
Fixed operating expenses, $m
 
  71
  72
  74
  76
  78
  80
  82
  84
  86
  88
  91
  93
  95
  97
  100
  102
  105
  108
  110
  113
  116
  119
  122
  125
  128
  131
  134
  138
  141
  145
Total operating expenses, $m
  118
  123
  125
  129
  132
  136
  140
  144
  148
  152
  157
  163
  167
  173
  178
  184
  190
  197
  204
  210
  218
  226
  234
  243
  251
  260
  270
  279
  290
  301
  312
Operating income, $m
  -56
  -60
  -61
  -63
  -64
  -66
  -67
  -69
  -70
  -72
  -74
  -75
  -77
  -78
  -80
  -82
  -83
  -85
  -87
  -89
  -90
  -92
  -94
  -96
  -98
  -99
  -101
  -103
  -105
  -107
  -109
EBITDA, $m
  -36
  -42
  -43
  -44
  -45
  -46
  -47
  -48
  -49
  -50
  -51
  -51
  -52
  -53
  -53
  -54
  -54
  -55
  -55
  -55
  -55
  -56
  -56
  -56
  -56
  -55
  -55
  -55
  -54
  -54
  -53
Interest expense (income), $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
  1
  1
  1
  1
  1
  1
  1
Earnings before tax, $m
  -55
  -60
  -61
  -63
  -64
  -66
  -67
  -69
  -70
  -72
  -74
  -75
  -77
  -79
  -80
  -82
  -84
  -85
  -87
  -89
  -91
  -93
  -94
  -96
  -98
  -100
  -102
  -104
  -106
  -108
  -110
Tax expense, $m
  -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
  0
  0
  0
  0
  0
Net income, $m
  -46
  -60
  -61
  -63
  -64
  -66
  -67
  -69
  -70
  -72
  -74
  -75
  -77
  -79
  -80
  -82
  -84
  -85
  -87
  -89
  -91
  -93
  -94
  -96
  -98
  -100
  -102
  -104
  -106
  -108
  -110

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  38
  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
  255
  221
  226
  232
  239
  246
  254
  262
  272
  282
  293
  304
  317
  330
  344
  358
  374
  391
  408
  427
  447
  467
  489
  512
  536
  562
  589
  617
  647
  678
  711
Adjusted assets (=assets-cash), $m
  217
  221
  226
  232
  239
  246
  254
  262
  272
  282
  293
  304
  317
  330
  344
  358
  374
  391
  408
  427
  447
  467
  489
  512
  536
  562
  589
  617
  647
  678
  711
Revenue / Adjusted assets
  0.286
  0.285
  0.288
  0.284
  0.285
  0.285
  0.287
  0.286
  0.287
  0.287
  0.287
  0.286
  0.287
  0.285
  0.285
  0.288
  0.286
  0.286
  0.287
  0.286
  0.286
  0.287
  0.286
  0.285
  0.285
  0.286
  0.285
  0.285
  0.286
  0.286
  0.286
Average production assets, $m
  85
  87
  89
  91
  94
  96
  99
  103
  107
  110
  115
  119
  124
  129
  135
  141
  147
  153
  160
  167
  175
  183
  192
  201
  210
  220
  231
  242
  254
  266
  279
Working capital, $m
  164
  32
  32
  33
  34
  35
  36
  38
  39
  40
  42
  43
  45
  47
  49
  51
  54
  56
  58
  61
  64
  67
  70
  73
  77
  80
  84
  88
  92
  97
  102
Total debt, $m
  0
  0
  1
  1
  1
  2
  2
  2
  3
  3
  4
  5
  5
  6
  7
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  18
  19
  20
  22
  24
  25
Total liabilities, $m
  10
  11
  12
  12
  12
  13
  13
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  35
  36
Total equity, $m
  244
  210
  215
  220
  226
  233
  241
  249
  258
  267
  278
  289
  300
  313
  326
  340
  355
  371
  388
  405
  424
  443
  464
  486
  509
  533
  559
  586
  614
  644
  675
Total liabilities and equity, $m
  254
  221
  227
  232
  238
  246
  254
  262
  272
  281
  293
  305
  316
  330
  344
  358
  374
  391
  409
  427
  447
  467
  489
  512
  536
  562
  589
  617
  647
  679
  711
Debt-to-equity ratio
  0.000
  0.000
  0.000
  0.000
  0.010
  0.010
  0.010
  0.010
  0.010
  0.010
  0.010
  0.020
  0.020
  0.020
  0.020
  0.020
  0.020
  0.020
  0.030
  0.030
  0.030
  0.030
  0.030
  0.030
  0.030
  0.030
  0.030
  0.030
  0.040
  0.040
  0.040
Adjusted equity ratio
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -46
  -60
  -61
  -63
  -64
  -66
  -67
  -69
  -70
  -72
  -74
  -75
  -77
  -79
  -80
  -82
  -84
  -85
  -87
  -89
  -91
  -93
  -94
  -96
  -98
  -100
  -102
  -104
  -106
  -108
  -110
Depreciation, amort., depletion, $m
  20
  17
  18
  18
  19
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  37
  38
  40
  42
  44
  46
  48
  51
  53
  56
Funds from operations, $m
  1
  -42
  -43
  -44
  -45
  -46
  -47
  -48
  -49
  -50
  -51
  -51
  -52
  -53
  -53
  -54
  -54
  -55
  -55
  -56
  -56
  -56
  -56
  -56
  -56
  -56
  -56
  -55
  -55
  -54
  -54
Change in working capital, $m
  3
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
Cash from operations, $m
  -2
  -43
  -44
  -45
  -46
  -47
  -48
  -49
  -50
  -51
  -52
  -53
  -54
  -55
  -55
  -56
  -57
  -57
  -58
  -58
  -59
  -59
  -59
  -59
  -60
  -60
  -60
  -59
  -59
  -59
  -59
Maintenance CAPEX, $m
  0
  -17
  -17
  -18
  -18
  -19
  -19
  -20
  -21
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -33
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -48
  -51
  -53
New CAPEX, $m
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
Cash from investing activities, $m
  -10
  -19
  -19
  -20
  -21
  -22
  -22
  -23
  -25
  -25
  -26
  -28
  -29
  -30
  -31
  -33
  -34
  -36
  -38
  -39
  -41
  -43
  -46
  -47
  -50
  -52
  -55
  -57
  -60
  -63
  -66
Free cash flow, $m
  -12
  -62
  -63
  -65
  -67
  -69
  -71
  -73
  -75
  -77
  -79
  -81
  -83
  -85
  -87
  -89
  -91
  -93
  -95
  -98
  -100
  -102
  -104
  -107
  -109
  -112
  -114
  -117
  -119
  -122
  -125
Issuance/(repayment) of debt, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
Issuance/(repurchase) of shares, $m
  0
  63
  66
  68
  70
  73
  75
  77
  79
  82
  84
  86
  89
  91
  94
  96
  99
  101
  104
  107
  109
  112
  115
  118
  121
  124
  127
  131
  134
  137
  141
Cash from financing (excl. dividends), $m  
  0
  63
  66
  68
  70
  73
  75
  77
  79
  83
  85
  87
  90
  92
  95
  97
  100
  102
  105
  108
  110
  113
  116
  119
  122
  125
  128
  132
  136
  139
  143
Total cash flow (excl. dividends), $m
  -12
  2
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
  17
  18
Retained Cash Flow (-), $m
  46
  -63
  -66
  -68
  -70
  -73
  -75
  -77
  -79
  -82
  -84
  -86
  -89
  -91
  -94
  -96
  -99
  -101
  -104
  -107
  -109
  -112
  -115
  -118
  -121
  -124
  -127
  -131
  -134
  -137
  -141
Prev. year cash balance distribution, $m
 
  38
  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
 
  -23
  -63
  -65
  -67
  -69
  -70
  -72
  -74
  -76
  -78
  -80
  -82
  -84
  -86
  -88
  -90
  -92
  -94
  -97
  -99
  -101
  -103
  -106
  -108
  -110
  -113
  -115
  -118
  -120
  -123
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
 
  -22
  -58
  -57
  -55
  -53
  -51
  -49
  -46
  -44
  -41
  -38
  -35
  -32
  -29
  -26
  -23
  -20
  -17
  -15
  -13
  -10
  -9
  -7
  -6
  -4
  -3
  -2
  -2
  -1
  -1
Current shareholders' claim on cash, %
  100
  71.6
  51.0
  36.2
  25.7
  18.2
  12.9
  9.1
  6.5
  4.6
  3.3
  2.3
  1.7
  1.2
  0.9
  0.6
  0.5
  0.3
  0.2
  0.2
  0.1
  0.1
  0.1
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Geospace Technologies Corporation designs and manufactures instruments and equipment used by the oil and gas industry to acquire seismic data in order to locate, characterize and monitor hydrocarbon producing reservoirs. The Company also designs and manufactures non-seismic products, including industrial products, offshore cables and imaging equipment. The Company operates through two segments: Seismic and Non-Seismic. The Company's Seismic product segments include traditional exploration products, wireless exploration products and reservoir products. Its seismic product lines consist of land and marine nodal data acquisition systems, permanent land and seabed reservoir monitoring products and services, geophones and geophone strings, hydrophones, leader wire, connectors, telemetry cables, marine streamer retrieval and steering devices and various other products. The Company's Non-Seismic product segments include imaging and industrial products.

FINANCIAL RATIOS  of  Geospace Technologies (GEOS)

Valuation Ratios
P/E Ratio -4.1
Price to Sales 3
Price to Book 0.8
Price to Tangible Book
Price to Cash Flow -94
Price to Free Cash Flow -47
Growth Rates
Sales Growth Rate -27.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -66.7%
Cap. Spend. - 3 Yr. Gr. Rate -45.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets -16.5%
Ret/ On Assets - 3 Yr. Avg. -5.2%
Return On Total Capital -17.2%
Ret/ On T. Cap. - 3 Yr. Avg. -5.3%
Return On Equity -17.2%
Return On Equity - 3 Yr. Avg. -5.3%
Asset Turnover 0.2
Profitability Ratios
Gross Margin -30.6%
Gross Margin - 3 Yr. Avg. -1%
EBITDA Margin -56.5%
EBITDA Margin - 3 Yr. Avg. -20.5%
Operating Margin -90.3%
Oper. Margin - 3 Yr. Avg. -42.9%
Pre-Tax Margin -88.7%
Pre-Tax Margin - 3 Yr. Avg. -41.6%
Net Profit Margin -74.2%
Net Profit Margin - 3 Yr. Avg. -32.5%
Effective Tax Rate 16.4%
Eff/ Tax Rate - 3 Yr. Avg. 27.3%
Payout Ratio 0%

GEOS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GEOS stock intrinsic value calculation we used $62 million for the last fiscal year's total revenue generated by Geospace Technologies. The default revenue input number comes from 2016 income statement of Geospace Technologies. 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 GEOS 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 GEOS is calculated based on our internal credit rating of Geospace Technologies, 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 Geospace Technologies.
    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 GEOS stock the variable cost ratio is equal to 82.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $69 million in the base year in the intrinsic value calculation for GEOS 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 3.5% for Geospace Technologies.

Corporate tax rate of 27% is the nominal tax rate for Geospace Technologies. 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 GEOS 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 GEOS are equal to 137.1%.

Life of production assets of 4.3 years is the average useful life of capital assets used in Geospace Technologies 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 GEOS 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 - $244 million for Geospace Technologies - 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 13.44 million for Geospace Technologies 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 Geospace Technologies at the current share price and the inputted number of shares is $0.2 billion.

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COMPANY NEWS

▶ Geospace Technologies' Revenue, EPS Losses Climb   [Dec-01-17 02:02PM  Motley Fool]
▶ Geospace Technologies reports 4Q loss   [Nov-30-17 04:39PM  Associated Press]
▶ Geospace Technologies reports 3Q loss   [03:17AM  Associated Press]
▶ Geospace Technologies reports 2Q loss   [05:03AM  Associated Press]
▶ Geospace Technologies reports 1Q loss   [Feb-08-17 04:52PM  Associated Press]
▶ 2 Stocks Below Net Currrent Asset Value   [Dec-17  02:00PM  at Investopedia]
▶ Is Quantum Corp (QTM) Going to Burn These Hedge Funds?   [Nov-25  02:30PM  at Insider Monkey]
Financial statements of GEOS
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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