Intrinsic value of Crawford Cl A - CRD-A

Previous Close

$8.35

  Intrinsic Value

$12.78

stock screener

  Rating & Target

str. buy

+53%

Previous close

$8.35

 
Intrinsic value

$12.78

 
Up/down potential

+53%

 
Rating

str. buy

We calculate the intrinsic value of CRD-A 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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, %
  -5.15
  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
  1,178
  1,187
  1,215
  1,246
  1,281
  1,320
  1,362
  1,409
  1,459
  1,513
  1,571
  1,633
  1,699
  1,770
  1,845
  1,925
  2,009
  2,098
  2,193
  2,292
  2,398
  2,509
  2,626
  2,750
  2,880
  3,017
  3,161
  3,313
  3,473
  3,641
  3,818
Variable operating expenses, $m
 
  1,114
  1,139
  1,168
  1,200
  1,235
  1,274
  1,317
  1,363
  1,412
  1,465
  1,494
  1,554
  1,619
  1,687
  1,760
  1,837
  1,919
  2,005
  2,097
  2,193
  2,295
  2,402
  2,515
  2,634
  2,759
  2,891
  3,030
  3,177
  3,330
  3,492
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
  1,105
  1,114
  1,139
  1,168
  1,200
  1,235
  1,274
  1,317
  1,363
  1,412
  1,465
  1,494
  1,554
  1,619
  1,687
  1,760
  1,837
  1,919
  2,005
  2,097
  2,193
  2,295
  2,402
  2,515
  2,634
  2,759
  2,891
  3,030
  3,177
  3,330
  3,492
Operating income, $m
  72
  73
  75
  78
  81
  84
  88
  92
  96
  101
  106
  139
  145
  151
  158
  164
  172
  179
  187
  196
  205
  214
  224
  235
  246
  258
  270
  283
  297
  311
  326
EBITDA, $m
  113
  133
  136
  139
  143
  148
  152
  157
  163
  169
  176
  183
  190
  198
  206
  215
  225
  235
  245
  256
  268
  280
  294
  307
  322
  337
  353
  370
  388
  407
  427
Interest expense (income), $m
  8
  12
  13
  14
  14
  15
  17
  18
  19
  20
  22
  24
  25
  27
  29
  31
  33
  36
  38
  41
  44
  47
  50
  53
  56
  60
  64
  68
  72
  77
  81
Earnings before tax, $m
  63
  61
  62
  64
  66
  69
  71
  74
  77
  80
  84
  116
  120
  124
  128
  133
  138
  143
  149
  155
  161
  168
  175
  182
  189
  198
  206
  215
  224
  234
  245
Tax expense, $m
  25
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  31
  32
  33
  35
  36
  37
  39
  40
  42
  43
  45
  47
  49
  51
  53
  56
  58
  61
  63
  66
Net income, $m
  36
  44
  46
  47
  49
  50
  52
  54
  56
  59
  61
  85
  87
  91
  94
  97
  101
  105
  109
  113
  118
  122
  127
  133
  138
  144
  150
  157
  164
  171
  179

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  82
  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
  736
  804
  822
  843
  867
  893
  922
  954
  988
  1,024
  1,064
  1,106
  1,151
  1,198
  1,249
  1,303
  1,360
  1,421
  1,485
  1,552
  1,623
  1,699
  1,778
  1,862
  1,950
  2,043
  2,140
  2,243
  2,351
  2,465
  2,585
Adjusted assets (=assets-cash), $m
  654
  804
  822
  843
  867
  893
  922
  954
  988
  1,024
  1,064
  1,106
  1,151
  1,198
  1,249
  1,303
  1,360
  1,421
  1,485
  1,552
  1,623
  1,699
  1,778
  1,862
  1,950
  2,043
  2,140
  2,243
  2,351
  2,465
  2,585
Revenue / Adjusted assets
  1.801
  1.476
  1.478
  1.478
  1.478
  1.478
  1.477
  1.477
  1.477
  1.478
  1.477
  1.476
  1.476
  1.477
  1.477
  1.477
  1.477
  1.476
  1.477
  1.477
  1.478
  1.477
  1.477
  1.477
  1.477
  1.477
  1.477
  1.477
  1.477
  1.477
  1.477
Average production assets, $m
  210
  313
  321
  329
  338
  348
  360
  372
  385
  399
  415
  431
  449
  467
  487
  508
  530
  554
  579
  605
  633
  662
  693
  726
  760
  796
  835
  875
  917
  961
  1,008
Working capital, $m
  135
  -50
  -51
  -52
  -54
  -55
  -57
  -59
  -61
  -64
  -66
  -69
  -71
  -74
  -77
  -81
  -84
  -88
  -92
  -96
  -101
  -105
  -110
  -115
  -121
  -127
  -133
  -139
  -146
  -153
  -160
Total debt, $m
  188
  238
  252
  268
  286
  306
  328
  352
  378
  406
  436
  468
  503
  539
  578
  619
  663
  709
  757
  809
  863
  921
  981
  1,045
  1,112
  1,183
  1,258
  1,336
  1,419
  1,506
  1,597
Total liabilities, $m
  582
  613
  627
  644
  662
  682
  704
  728
  754
  782
  812
  844
  878
  914
  953
  994
  1,038
  1,084
  1,133
  1,184
  1,239
  1,296
  1,357
  1,420
  1,488
  1,559
  1,633
  1,712
  1,794
  1,881
  1,972
Total equity, $m
  154
  191
  195
  200
  206
  212
  219
  226
  234
  243
  252
  262
  273
  284
  296
  309
  322
  337
  352
  368
  385
  403
  421
  441
  462
  484
  507
  532
  557
  584
  613
Total liabilities and equity, $m
  736
  804
  822
  844
  868
  894
  923
  954
  988
  1,025
  1,064
  1,106
  1,151
  1,198
  1,249
  1,303
  1,360
  1,421
  1,485
  1,552
  1,624
  1,699
  1,778
  1,861
  1,950
  2,043
  2,140
  2,244
  2,351
  2,465
  2,585
Debt-to-equity ratio
  1.221
  1.250
  1.290
  1.340
  1.390
  1.450
  1.500
  1.560
  1.620
  1.670
  1.730
  1.790
  1.840
  1.900
  1.950
  2.000
  2.060
  2.100
  2.150
  2.200
  2.240
  2.290
  2.330
  2.370
  2.410
  2.440
  2.480
  2.510
  2.550
  2.580
  2.610
Adjusted equity ratio
  0.110
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  36
  44
  46
  47
  49
  50
  52
  54
  56
  59
  61
  85
  87
  91
  94
  97
  101
  105
  109
  113
  118
  122
  127
  133
  138
  144
  150
  157
  164
  171
  179
Depreciation, amort., depletion, $m
  41
  60
  60
  61
  62
  63
  64
  66
  67
  68
  70
  43
  45
  47
  49
  51
  53
  55
  58
  61
  63
  66
  69
  73
  76
  80
  83
  87
  92
  96
  101
Funds from operations, $m
  102
  104
  106
  108
  111
  113
  116
  120
  123
  127
  131
  128
  132
  137
  142
  148
  154
  160
  167
  174
  181
  189
  197
  205
  214
  224
  234
  244
  256
  267
  279
Change in working capital, $m
  3
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
Cash from operations, $m
  99
  105
  107
  110
  112
  115
  118
  122
  125
  129
  134
  130
  135
  140
  146
  151
  157
  164
  171
  178
  185
  193
  202
  211
  220
  230
  240
  251
  262
  274
  287
Maintenance CAPEX, $m
  0
  -31
  -31
  -32
  -33
  -34
  -35
  -36
  -37
  -39
  -40
  -41
  -43
  -45
  -47
  -49
  -51
  -53
  -55
  -58
  -61
  -63
  -66
  -69
  -73
  -76
  -80
  -83
  -87
  -92
  -96
New CAPEX, $m
  -29
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -44
  -47
Cash from investing activities, $m
  -33
  -37
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -53
  -55
  -57
  -60
  -64
  -67
  -70
  -73
  -77
  -80
  -84
  -89
  -92
  -97
  -102
  -107
  -112
  -118
  -123
  -129
  -136
  -143
Free cash flow, $m
  66
  68
  69
  69
  70
  71
  72
  73
  75
  76
  78
  72
  75
  77
  79
  82
  84
  87
  90
  94
  97
  101
  104
  109
  113
  117
  122
  127
  133
  138
  144
Issuance/(repayment) of debt, $m
  -39
  12
  14
  16
  18
  20
  22
  24
  26
  28
  30
  32
  34
  36
  39
  41
  44
  46
  49
  52
  54
  57
  61
  64
  67
  71
  75
  78
  83
  87
  91
Issuance/(repurchase) of shares, $m
  2
  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 from financing (excl. dividends), $m  
  -41
  12
  14
  16
  18
  20
  22
  24
  26
  28
  30
  32
  34
  36
  39
  41
  44
  46
  49
  52
  54
  57
  61
  64
  67
  71
  75
  78
  83
  87
  91
Total cash flow (excl. dividends), $m
  20
  81
  83
  85
  88
  91
  94
  97
  101
  104
  108
  105
  109
  113
  118
  123
  128
  133
  139
  145
  151
  158
  165
  172
  180
  188
  197
  206
  215
  225
  235
Retained Cash Flow (-), $m
  -40
  -4
  -4
  -5
  -6
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -28
Prev. year cash balance distribution, $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 flow adjustment, $m
 
  7
  7
  7
  7
  8
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
Cash available for distribution, $m
 
  77
  78
  80
  83
  85
  87
  90
  93
  96
  99
  95
  98
  102
  106
  110
  114
  119
  124
  129
  134
  140
  146
  153
  159
  166
  174
  181
  190
  198
  207
Discount rate, %
 
  6.90
  7.25
  7.61
  7.99
  8.39
  8.81
  9.25
  9.71
  10.19
  10.70
  11.24
  11.80
  12.39
  13.01
  13.66
  14.34
  15.06
  15.81
  16.61
  17.44
  18.31
  19.22
  20.18
  21.19
  22.25
  23.37
  24.53
  25.76
  27.05
  28.40
PV of cash for distribution, $m
 
  72
  68
  65
  61
  57
  53
  48
  44
  40
  36
  29
  26
  22
  19
  16
  13
  11
  9
  7
  5
  4
  3
  2
  2
  1
  1
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Crawford & Company (Crawford) is an independent provider of claims management solutions to insurance and self-insured entities. The Company's Crawford Solution offers claims services, business process outsourcing and consulting services for various product lines, including property and casualty claims management; workers' compensation claims and medical management, and legal settlement administration. Crawford conducts its operations through four segments: U.S. Services, which primarily serves the property and casualty insurance company markets in the United States; International, which serves the property and casualty insurance company, and self-insurance markets outside the United States; Broadspire, which serves the self-insurance marketplace, primarily in the United States, and Garden City Group, which serves the class action, regulatory, mass tort, bankruptcy and other legal settlement markets, primarily in the United States.

FINANCIAL RATIOS  of  Crawford Cl A (CRD-A)

Valuation Ratios
P/E Ratio 13
Price to Sales 0.4
Price to Book 3
Price to Tangible Book
Price to Cash Flow 4.7
Price to Free Cash Flow 6.7
Growth Rates
Sales Growth Rate -5.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -12.1%
Cap. Spend. - 3 Yr. Gr. Rate -1.3%
Financial Strength
Quick Ratio 82
Current Ratio 0
LT Debt to Equity 121.4%
Total Debt to Equity 122.1%
Interest Coverage 9
Management Effectiveness
Return On Assets 5.4%
Ret/ On Assets - 3 Yr. Avg. 1.8%
Return On Total Capital 10.2%
Ret/ On T. Cap. - 3 Yr. Avg. 2.2%
Return On Equity 26.9%
Return On Equity - 3 Yr. Avg. 4%
Asset Turnover 1.6
Profitability Ratios
Gross Margin 27.2%
Gross Margin - 3 Yr. Avg. 25.4%
EBITDA Margin 9.5%
EBITDA Margin - 3 Yr. Avg. 6.6%
Operating Margin 6.2%
Oper. Margin - 3 Yr. Avg. 3.3%
Pre-Tax Margin 5.3%
Pre-Tax Margin - 3 Yr. Avg. 2.6%
Net Profit Margin 3.1%
Net Profit Margin - 3 Yr. Avg. 0.7%
Effective Tax Rate 39.7%
Eff/ Tax Rate - 3 Yr. Avg. 14.8%
Payout Ratio 38.9%

CRD-A stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CRD-A stock intrinsic value calculation we used $1164 million for the last fiscal year's total revenue generated by Crawford Cl A. The default revenue input number comes from 2016 income statement of Crawford Cl A. 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 CRD-A 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 6.9%, whose default value for CRD-A is calculated based on our internal credit rating of Crawford Cl A, 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 Crawford Cl A.
    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 CRD-A stock the variable cost ratio is equal to 93.9%.

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 CRD-A 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 Crawford Cl A.

Corporate tax rate of 27% is the nominal tax rate for Crawford Cl A. 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 CRD-A stock is equal to 0.6%.

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 CRD-A are equal to 26.4%.

Life of production assets of 10 years is the average useful life of capital assets used in Crawford Cl A 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 CRD-A is equal to -4.2%. 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 - $187 million for Crawford Cl A - 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 56 million for Crawford Cl A 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 Crawford Cl A at the current share price and the inputted number of shares is $0.5 billion.

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COMPANY NEWS

▶ Crawford & Co. sells its Garden City subsidiary for $42M   [Jun-18-18 05:47PM  American City Business Journals]
▶ Epiq Acquires Garden City Group   [09:12AM  GlobeNewswire]
▶ Crawford & Company® and WeGoLook® launch UK services   [Jun-15-18 06:00AM  GlobeNewswire]
▶ Crawford: 1Q Earnings Snapshot   [May-10-18 07:31PM  Associated Press]
▶ Crawford & Company Class A to Host Earnings Call   [Mar-08-18 06:45AM  ACCESSWIRE]
▶ Crawford & Company Reports 2017 Fourth Quarter Results   [Mar-07-18 04:15PM  GlobeNewswire]
▶ WeGoLook® Connects to the CCC ONE® Platform   [Mar-06-18 08:30AM  GlobeNewswire]
▶ Crawford & Company® Board Declares Quarterly Dividends   [Feb-09-18 11:00AM  GlobeNewswire]
▶ Crawford® Launches Enhanced Total Construction Solution   [Feb-06-18 09:15AM  GlobeNewswire]
▶ ETFs with exposure to Crawford & Co. : December 21, 2017   [Dec-21-17 11:22AM  Capital Cube]
Financial statements of CRD-A
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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