What is AXAS's Intrinsic value?

Abraxas Petroleum Corp (AXAS) Intrinsic Value Analysis

Executive Summary

As of June 21, 2025, Abraxas Petroleum Corp's estimated intrinsic value ranges from $87.33 to $260.24 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $260.24 +14043.3%
Discounted Cash Flow (5Y) $213.01 +11476.6%
Dividend Discount Model (Multi-Stage) $87.33 +4646.0%
Dividend Discount Model (Stable) $145.64 +7815.3%

Is Abraxas Petroleum Corp (AXAS) undervalued or overvalued?

With the current market price at $1.84, the stock appears to be significantly undervalued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Abraxas Petroleum Corp's intrinsic value, including:

  1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows
  2. Dividend Discount Model (DDM): Values the company based on expected future dividend payments

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 4.2% 4.7%
Equity market risk premium 5.0% 6.0%
Adjusted beta 1.14 1.63
Cost of equity 9.9% 15.0%
Cost of debt 4.0% 4.9%
Tax rate 26.2% 27.0%
Debt/Equity ratio 1 1
After-tax WACC 6.4% 9.3%

Valuation Methods

1. Discounted Cash Flow (DCF) Valuation

Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:

  • Forecast Period: 5-year DCF and 10-year DCF
  • Terminal Growth Rate: 0.0% (range: 3.0% - 5.0%)
  • Discount Rate: 7.8% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $50 (FY12-2022) to $70 (FY12-2032)
  • Net profit margin expansion from 75% to 55%
  • Capital expenditures maintained at approximately 48% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $213 $402M 69.8%
10-Year Growth $260 $491M 52.9%
5-Year EBITDA $117 $219M 44.6%
10-Year EBITDA $168 $317M 27.0%

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 0.0%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 12.4%
  • Long-term growth rate: 0.5%
  • Fair value: $87.33 (4646.0% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 15.0% (Low) to 9.9% (High)
  • Long-term growth rate: 0.0% (Low) to 1.0% (High)
  • Fair value range: $92 to $199
  • Selected fair value: $145.64 (7815.3% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $3M
Enterprise Value $1M
Trailing P/E 0.09
Forward P/E 0.12
Trailing EV/EBITDA 2.10
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 1.06

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Discounted Cash Flow (10Y) 33% $78.07
Discounted Cash Flow (5Y) 28% $53.25
Dividend Discount Model (Multi-Stage) 22% $17.47
Dividend Discount Model (Stable) 17% $21.85
Weighted Average 100% $189.59

Investment Conclusion

Based on our comprehensive valuation analysis, Abraxas Petroleum Corp's weighted average intrinsic value is $189.59, which is approximately 10204.0% above the current market price of $1.84.

Key investment considerations:

  • Strong projected earnings growth (75% to 55% margin)
  • Consistent cash flow generation

Given these factors, we believe Abraxas Petroleum Corp is currently significantly undervalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.