Intrinsic value of ExlService Holdings - EXLS

Previous Close

$61.86

  Intrinsic Value

$39.20

stock screener

  Rating & Target

sell

-37%

Previous close

$61.86

 
Intrinsic value

$39.20

 
Up/down potential

-37%

 
Rating

sell

We calculate the intrinsic value of EXLS 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, %
  9.24
  12.30
  11.57
  10.91
  10.32
  9.79
  9.31
  8.88
  8.49
  8.14
  7.83
  7.55
  7.29
  7.06
  6.86
  6.67
  6.50
  6.35
  6.22
  6.10
  5.99
  5.89
  5.80
  5.72
  5.65
  5.58
  5.52
  5.47
  5.42
  5.38
  5.34
Revenue, $m
  686
  770
  860
  953
  1,052
  1,155
  1,262
  1,374
  1,491
  1,612
  1,739
  1,870
  2,006
  2,148
  2,295
  2,448
  2,607
  2,773
  2,945
  3,125
  3,312
  3,507
  3,710
  3,922
  4,144
  4,375
  4,617
  4,869
  5,134
  5,410
  5,699
Variable operating expenses, $m
 
  686
  764
  845
  930
  1,019
  1,113
  1,210
  1,311
  1,416
  1,526
  1,621
  1,739
  1,862
  1,989
  2,122
  2,260
  2,403
  2,553
  2,708
  2,871
  3,040
  3,216
  3,400
  3,592
  3,792
  4,002
  4,221
  4,450
  4,689
  4,940
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
  622
  686
  764
  845
  930
  1,019
  1,113
  1,210
  1,311
  1,416
  1,526
  1,621
  1,739
  1,862
  1,989
  2,122
  2,260
  2,403
  2,553
  2,708
  2,871
  3,040
  3,216
  3,400
  3,592
  3,792
  4,002
  4,221
  4,450
  4,689
  4,940
Operating income, $m
  64
  84
  96
  108
  121
  135
  149
  164
  180
  196
  213
  249
  267
  286
  306
  326
  347
  370
  392
  416
  441
  467
  494
  523
  552
  583
  615
  649
  684
  721
  759
EBITDA, $m
  99
  117
  131
  145
  160
  175
  192
  209
  226
  245
  264
  284
  305
  326
  349
  372
  396
  421
  447
  475
  503
  533
  564
  596
  629
  665
  701
  740
  780
  822
  866
Interest expense (income), $m
  1
  1
  2
  3
  4
  4
  5
  6
  7
  8
  9
  10
  11
  12
  14
  15
  16
  17
  19
  20
  22
  23
  25
  27
  29
  30
  32
  34
  37
  39
  41
Earnings before tax, $m
  84
  83
  94
  106
  118
  131
  144
  158
  173
  188
  204
  239
  256
  274
  292
  311
  331
  352
  374
  396
  420
  444
  469
  496
  524
  553
  583
  615
  648
  682
  718
Tax expense, $m
  22
  22
  25
  29
  32
  35
  39
  43
  47
  51
  55
  65
  69
  74
  79
  84
  89
  95
  101
  107
  113
  120
  127
  134
  141
  149
  157
  166
  175
  184
  194
Net income, $m
  62
  60
  69
  77
  86
  96
  105
  116
  126
  137
  149
  174
  187
  200
  213
  227
  242
  257
  273
  289
  306
  324
  343
  362
  382
  403
  426
  449
  473
  498
  524

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  227
  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
  707
  539
  601
  667
  736
  808
  883
  962
  1,043
  1,128
  1,217
  1,308
  1,404
  1,503
  1,606
  1,713
  1,825
  1,940
  2,061
  2,187
  2,318
  2,454
  2,596
  2,745
  2,900
  3,062
  3,231
  3,408
  3,592
  3,786
  3,988
Adjusted assets (=assets-cash), $m
  480
  539
  601
  667
  736
  808
  883
  962
  1,043
  1,128
  1,217
  1,308
  1,404
  1,503
  1,606
  1,713
  1,825
  1,940
  2,061
  2,187
  2,318
  2,454
  2,596
  2,745
  2,900
  3,062
  3,231
  3,408
  3,592
  3,786
  3,988
Revenue / Adjusted assets
  1.429
  1.429
  1.431
  1.429
  1.429
  1.429
  1.429
  1.428
  1.430
  1.429
  1.429
  1.430
  1.429
  1.429
  1.429
  1.429
  1.428
  1.429
  1.429
  1.429
  1.429
  1.429
  1.429
  1.429
  1.429
  1.429
  1.429
  1.429
  1.429
  1.429
  1.429
Average production assets, $m
  102
  115
  128
  142
  157
  172
  188
  205
  222
  240
  259
  279
  299
  320
  342
  365
  388
  413
  439
  466
  493
  523
  553
  584
  617
  652
  688
  726
  765
  806
  849
Working capital, $m
  255
  42
  47
  52
  58
  64
  69
  76
  82
  89
  96
  103
  110
  118
  126
  135
  143
  153
  162
  172
  182
  193
  204
  216
  228
  241
  254
  268
  282
  298
  313
Total debt, $m
  46
  56
  78
  100
  124
  149
  175
  202
  230
  259
  290
  321
  354
  388
  423
  460
  499
  539
  580
  623
  668
  715
  764
  815
  869
  924
  982
  1,043
  1,107
  1,173
  1,243
Total liabilities, $m
  175
  185
  207
  229
  253
  278
  304
  331
  359
  388
  419
  450
  483
  517
  552
  589
  628
  668
  709
  752
  797
  844
  893
  944
  998
  1,053
  1,111
  1,172
  1,236
  1,302
  1,372
Total equity, $m
  532
  354
  395
  438
  483
  530
  579
  631
  684
  740
  798
  858
  921
  986
  1,054
  1,124
  1,197
  1,273
  1,352
  1,434
  1,520
  1,610
  1,703
  1,801
  1,902
  2,008
  2,119
  2,235
  2,357
  2,483
  2,616
Total liabilities and equity, $m
  707
  539
  602
  667
  736
  808
  883
  962
  1,043
  1,128
  1,217
  1,308
  1,404
  1,503
  1,606
  1,713
  1,825
  1,941
  2,061
  2,186
  2,317
  2,454
  2,596
  2,745
  2,900
  3,061
  3,230
  3,407
  3,593
  3,785
  3,988
Debt-to-equity ratio
  0.086
  0.160
  0.200
  0.230
  0.260
  0.280
  0.300
  0.320
  0.340
  0.350
  0.360
  0.370
  0.380
  0.390
  0.400
  0.410
  0.420
  0.420
  0.430
  0.430
  0.440
  0.440
  0.450
  0.450
  0.460
  0.460
  0.460
  0.470
  0.470
  0.470
  0.480
Adjusted equity ratio
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  62
  60
  69
  77
  86
  96
  105
  116
  126
  137
  149
  174
  187
  200
  213
  227
  242
  257
  273
  289
  306
  324
  343
  362
  382
  403
  426
  449
  473
  498
  524
Depreciation, amort., depletion, $m
  35
  33
  35
  36
  38
  40
  42
  44
  46
  49
  51
  35
  37
  40
  43
  46
  49
  52
  55
  58
  62
  65
  69
  73
  77
  81
  86
  91
  96
  101
  106
Funds from operations, $m
  87
  93
  103
  114
  124
  136
  148
  160
  173
  186
  200
  209
  224
  240
  256
  273
  290
  309
  328
  347
  368
  389
  412
  435
  459
  485
  512
  539
  568
  599
  631
Change in working capital, $m
  -13
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
Cash from operations, $m
  100
  89
  98
  108
  119
  130
  142
  154
  166
  179
  193
  202
  217
  232
  248
  264
  282
  300
  318
  337
  358
  379
  401
  423
  447
  472
  498
  525
  554
  584
  615
Maintenance CAPEX, $m
  0
  -13
  -14
  -16
  -18
  -20
  -22
  -24
  -26
  -28
  -30
  -32
  -35
  -37
  -40
  -43
  -46
  -49
  -52
  -55
  -58
  -62
  -65
  -69
  -73
  -77
  -81
  -86
  -91
  -96
  -101
New CAPEX, $m
  -26
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -34
  -36
  -38
  -39
  -41
  -43
Cash from investing activities, $m
  -55
  -26
  -27
  -30
  -33
  -35
  -38
  -41
  -43
  -46
  -49
  -52
  -55
  -58
  -62
  -66
  -70
  -74
  -78
  -82
  -86
  -91
  -95
  -101
  -106
  -111
  -117
  -124
  -130
  -137
  -144
Free cash flow, $m
  45
  63
  71
  78
  87
  95
  104
  113
  123
  134
  144
  150
  162
  174
  186
  199
  212
  226
  241
  256
  272
  288
  305
  323
  341
  361
  381
  402
  424
  447
  471
Issuance/(repayment) of debt, $m
  -25
  20
  21
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  34
  35
  37
  38
  40
  42
  43
  45
  47
  49
  51
  53
  56
  58
  61
  64
  67
  70
Issuance/(repurchase) of shares, $m
  -12
  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  
  -33
  20
  21
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  34
  35
  37
  38
  40
  42
  43
  45
  47
  49
  51
  53
  56
  58
  61
  64
  67
  70
Total cash flow (excl. dividends), $m
  8
  84
  92
  101
  110
  120
  130
  140
  151
  163
  175
  182
  194
  208
  221
  236
  251
  266
  282
  299
  317
  335
  354
  374
  395
  416
  439
  463
  487
  513
  540
Retained Cash Flow (-), $m
  -66
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -54
  -56
  -58
  -60
  -63
  -65
  -68
  -70
  -73
  -76
  -79
  -82
  -86
  -90
  -93
  -97
  -102
  -106
  -111
  -116
  -121
  -127
  -133
Prev. year cash balance distribution, $m
 
  217
  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
 
  262
  51
  58
  65
  73
  81
  89
  98
  107
  117
  122
  132
  143
  154
  166
  178
  190
  203
  217
  231
  245
  261
  276
  293
  310
  328
  347
  366
  386
  408
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
 
  251
  47
  50
  54
  56
  59
  60
  61
  61
  61
  58
  56
  54
  52
  49
  45
  41
  37
  33
  29
  25
  22
  18
  15
  12
  10
  7
  6
  4
  3
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

ExlService Holdings, Inc. is an operations management and analytics company. The Company segments include Insurance; Healthcare; Travel, Transportation and Logistics; Finance and Accounting (F&A); Analytics, and All Other. The Insurance operating segment serves property and casualty insurance, life insurance, disability insurance, annuity and retirement services companies. The Healthcare operating segment serves healthcare payers and providers. The Travel, Transportation and Logistics operating segment primarily serves clients in the travel, transport and logistics industries. The F&A operating segment provides finance and accounting business process management (BPM) services across an array of F&A processes. The Analytics services focus on driving business outcomes for its customers by generating data-driven insights across all parts of its customers' businesses. The All Other segment includes banking and financial services, utilities and consulting operating segments.

FINANCIAL RATIOS  of  ExlService Holdings (EXLS)

Valuation Ratios
P/E Ratio 33.6
Price to Sales 3
Price to Book 3.9
Price to Tangible Book
Price to Cash Flow 20.8
Price to Free Cash Flow 28.1
Growth Rates
Sales Growth Rate 9.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate 10.2%
Financial Strength
Quick Ratio 23
Current Ratio 0.2
LT Debt to Equity 6.8%
Total Debt to Equity 8.6%
Interest Coverage 85
Management Effectiveness
Return On Assets 9.2%
Ret/ On Assets - 3 Yr. Avg. 8%
Return On Total Capital 11.1%
Ret/ On T. Cap. - 3 Yr. Avg. 9.7%
Return On Equity 12.4%
Return On Equity - 3 Yr. Avg. 10.8%
Asset Turnover 1
Profitability Ratios
Gross Margin 34.7%
Gross Margin - 3 Yr. Avg. 34.7%
EBITDA Margin 17.5%
EBITDA Margin - 3 Yr. Avg. 16%
Operating Margin 9.3%
Oper. Margin - 3 Yr. Avg. 8.9%
Pre-Tax Margin 12.2%
Pre-Tax Margin - 3 Yr. Avg. 10.7%
Net Profit Margin 9%
Net Profit Margin - 3 Yr. Avg. 7.9%
Effective Tax Rate 26.2%
Eff/ Tax Rate - 3 Yr. Avg. 24.5%
Payout Ratio 0%

EXLS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the EXLS stock intrinsic value calculation we used $686 million for the last fiscal year's total revenue generated by ExlService Holdings. The default revenue input number comes from 2016 income statement of ExlService Holdings. 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 EXLS stock valuation model: a) initial revenue growth rate of 12.3% 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 EXLS is calculated based on our internal credit rating of ExlService Holdings, 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 ExlService Holdings.
    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 EXLS stock the variable cost ratio is equal to 89.4%.

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 EXLS 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 ExlService Holdings.

Corporate tax rate of 27% is the nominal tax rate for ExlService Holdings. 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 EXLS 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 EXLS are equal to 14.9%.

Life of production assets of 8 years is the average useful life of capital assets used in ExlService Holdings 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 EXLS is equal to 5.5%. 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 - $532 million for ExlService Holdings - 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 34.3 million for ExlService Holdings 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 ExlService Holdings at the current share price and the inputted number of shares is $2.1 billion.

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COMPANY NEWS

▶ ExlService Holdings beats Street 3Q forecasts   [Oct-26-17 08:17AM  Associated Press]
▶ EXL Reports 2017 Third Quarter Results   [06:00AM  GlobeNewswire]
▶ Top Ranked Growth Stocks to Buy for August 17th   [Aug-17-17 09:42AM  Zacks]
▶ Top Ranked Growth Stocks to Buy for August 2nd   [Aug-02-17 09:53AM  Zacks]
▶ ExlService Holdings tops Street 2Q forecasts   [01:39AM  Associated Press]
▶ EXL Reports 2017 Second Quarter Results   [06:00AM  GlobeNewswire]
▶ EXL Launches New Delivery Centers in Chennai and Hyderabad   [Jun-26-17 08:30AM  GlobeNewswire]
▶ Biotech Musical Chairs: Who Leads Next   [May-31-17 06:00AM  Investopedia]
▶ ExlService Holdings tops Street 1Q forecasts   [06:29AM  Associated Press]
▶ Exl Reports 2017 First Quarter Results   [06:00AM  GlobeNewswire]
▶ EXL Wins Best Company of the Year in the Philippines   [Apr-26-17 08:00AM  GlobeNewswire]
▶ ExlService Holdings meets 4Q profit forecasts   [06:19AM  Associated Press]
▶ Should You Buy Houlihan Lokey Inc (HLI)?   [Dec-09-16 07:37PM  at Insider Monkey]
Financial statements of EXLS
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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