DEXTools has quickly become the leading data analytics and trading platform for the Decentralized Finance (DeFi) industry and, as an early adopter of deflationary tokenomics, DEXTools uses a portion of its revenue streams to continuosly buy back and burn $DEXT tokens.
This analysis focuses specifically on the revenues flowing into $DEXT to measure the revenue power reinvested in the token. Using a Price/Earnings valuation model reveals that $DEXT may be deeply undervalued relative to earnings growth.
Although the valuation of crypto projects remains highly speculative, benchmarking multiples provides perspective on underlying fundamental value. As more data becomes available, P/E analysis will shed light on the risk/reward asymmetry of $DEXT.
DEXTools Revenue Streams
DEXTools is extremely interesting because it has a diversified set of revenue streams, such as:
- Banners in app (with 20m+ views/month)
- DextForce ventures fees and profits
- Fees paid by project to update social info on-app
- Fees from on-platform multi-dex aggregator
The first two points are used to sustain operations, development, expand the DEXTools ecosystem, and also to perform acquisitions. Even though the numbers are not disclosed, we estimate a revenue north of $300k per month for points #1 and #2.
Update social info revenues in $BNB and $ETH are used to cover marketing and expansion activities (roughly, 15 ETH/day) while everything paid in $DEXT (cheapest option) is instead directly burned.
The aggregator revenues instead are fully used to buy back $DEXT from the market and burn it. These two activities create a constant buy pressure, currently in the 1M to 1.5M $DEXT per month.
For the following model we will consider only those revenues that have a direct impact on the token, meaning that they’re used to buy-back and burn $DEXT. For this reason, the first two points will not be considered in the model.
In addition, we will consider two other sources of revenue: the upcoming launch of the NFT collection and access to the API that will require $DEXT.
Key Stats and Data Inputs for the Model
The price/earnings (P/E) ratio compares a company’s share price to its earnings per share. It provides a widely used valuation metric to benchmark potential under or overvaluation.
While crypto assets have unique properties, applying a P/E model directionally measures if an asset’s price properly reflects underlying earnings power.
To analyze potential undervaluation, the current price and supply of $DEXT are compared with annualized revenue estimates based on recent data:
- $DEXT Value: $0.48
- $DEXT Supply: 94.2 million
- Market capitalization: $45.2 million
- Estimated Annual Revenue from “Aggregator”: $1.46 million
- Estimated Annual Revenue from “Update Social”: $4.63 million
- Other Estimated Annual Revenue: $1 million
- Total Estimated Annual Revenue: $7.09 million
Yes, it has a capitalization of just $45.2m.
The following model assumes a growth rate of 0% and considers data for the last seven months, from February 2023 to August 2023.
Plugging it together:
P/E = Price per Share / Earnings per Share
Current P/E = 6.4x
A P/E of 6.4x means DEXTools trades over 6 times earnings. How does this compare?
Benchmarking against broader market averages provides perspective:
- Average Company in S&P 500: 31x
- Fast Growing Company P/E: 50x
- Extremely Fast Growing Company P/E: 100x
Compared to these benchmarks, DEXTools’ 6.4x P/E suggests potential undervaluation relative to earnings power.
If DEXTools traded at a 100x P/E typical of hyper growth companies, it would reach:
- Price per $DEXT: $7.52
- Upside: 1467%
- Valuation: $708 million
Even at a more moderate 50x P/E, DEXTools would trade at:
- Price per $DEXT: $3.76
- Upside: 684%
- Valuation: $354 million
The wide variance in potential valuation based on different plausible P/E multiples indicates the potential for substantial upside if revenues continue growing.
Of course, assigning P/E ratios remains an imprecise art, especially for crypto projects. But directionally, the benchmarks illustrate how undervalued DEXTools is relative to earnings.
DEXTools’ token $DEXT in August ‘23 ($0.48) is 3.6 times more undervalued than $DEXT April ‘22 ($0.28), even if the price is higher.
One may think: how is this possible?
Estimated annual revenues grew sharply from $1.24 million to a projected $7.08 million by 2023. This underscores the company’s growing ability to monetize its platform and generate larger cash flows.
Although revenues have increased substantially, the P/E ratio decreased from 23.1x to 6.4x (the lower, the more real “value” is in the token).
This suggests the price has not appropriately captured DEXTools’ upgrading profit potential.
In summary, the updated model highlights how DEXTools is delivering real and growing cash flows through diversified revenue streams, yet its token valuation still not fully reflect this positive trend according to this valuation model.
The outlook for continued revenue growth at DEXTools appears promising. As the broader crypto market potentially enters a new bull market phase, token launch activity typically accelerates. This would drive higher revenues for DEXTools’ update social and aggregator services as more projects and users utilize the platform.
The following features are ready to be released or in advanced state of development:
- Never stop integrating new chains and tools (keep adoption)
- DEXTbots NFT collection (more revenue and holders)
- DEXT AMM (more revenue)
- DEXT Force Governance (more utility for the token)
- DEXT Launchpad (more revenue, holders and utility for the token)
With new revenue streams coming online and existing ones poised to scale further in a bull market, It is more than likely that DEXTools’ current financial performance likely understates its future earnings power.
Therefore, the valuation discounts indicated by the P/E model may represent a compelling asymmetric opportunity if the growth narrative plays out in the years ahead.
In conclusion, this valuation analysis highlights that while cryptocurrency evaluations remain speculative by nature, DEXTools’ financial fundamentals illustrate a compelling long-term opportunity. The company has established itself as the leading platform for DeFi data and trading through diverse and fast-growing revenue streams.
However, DEXTools’ token valuation according to comparative P/E models still suggests it is trading at a discount relative to underlying earnings power. Both the significant growth achieved in a short time span as well as planned expansions signal the potential for revenues and profits to scale much further.
If the business can sustain its momentum even partially, DEXTools appears well-positioned to justify higher multiples more aligned with industry benchmarks over the long run. This would translate to substantial price appreciation from today’s levels for $DEXT according to the valuation models.
Article written by Pierandrea Cecconi (@PierArmy), Project Development Blockchain Army