The Bearish:

Unfortunately, the net margins are inconsistent (in 2003 fiscal year they were negative). Here is the list: FY04 – 12.43% FY05 – 8.53% FY06 – 9.41% FY07 - 10.54% Here we can see the overall decline since 2004 fiscal year, but however net margins increased during the FY05-FY07 period.

Balance Sheet,

The Bullish:

When analyzing the balance sheet I always look at the long-term debt value. In the case of Dawson Geophysical, Inc long-term debt was zero in 2007 fiscal year as well as in all the previous ones: 2003, 2004, 2005, 2006 fiscal years. I consider Retained Earnings value also very important. In 2003 fiscal year retained earnings value was negative (-140000$). However during all further years retained earnings grew fast at a CAGR of 99.68%. The Bearish: I don’t like the Dawson’s cash and cash equivalents dynamics. Cash and cash equivalents performed unstable growth and decreased from time to time. Here you can see the list: FY03 – 12.01 millions FY04 – 7.72 millions FY05 – 23.13 millions FY06 – 14.5 millions FY07 – 14.88 millions Moreover, net receivables performed strong and consistent growth dislike cash and cash equivalents. To be more exact the net receivables CAGR growth during FY03-FY07 period equaled to 55.46% per year. That’s a bad sign Cash Flows statement, The Bullish: I was fascinated by the strong net cash from operations growth of 153.77% per year since 2003 fiscal year until 2007. Capital expenditures grew at a less rate of 75.77% per year. This indicates that FCF (Free cash flows) amount grew. Furthermore, I like that operating cash flows amount hasn’t declined even in a single year and was always positive while cash from investing and financing activities was negative. Such combination indicates the internal financial development.

The Bearish: Nothing.

Risks:

1. If oil or gas prices decline or level of the oil and gas companies’ capital expenditures then the demand for the Dawson’s services may decline.

2. As Dawson geophysical, Inc faces intense competition, its market share may fall as the result of a strong pricing pressure.

3. As there is a limited potential for Dawson’s customers, the loss of even one may seriously harm the business.

4. There are very large capital requirements for Dawson’s business and it may not be able to finance them all.

5. The industry, the company operates in, is a subject for governmental regulation.

Valuation:

Let’s consider the DCF valuation first. According to the valuepro.net calculator, the |ISV (Intrinsic Stock Value) of the Dawson Geophysical, Inc equals to 29.65$ while the current price is 61.31$. These numbers tell us that Dawson is overvalued by 106.78%.