Intrinsic value of FTI Consulting - FCN

Previous Close

$43.28

  Intrinsic Value

$74.96

stock screener

  Rating & Target

str. buy

+73%

Previous close

$43.28

 
Intrinsic value

$74.96

 
Up/down potential

+73%

 
Rating

str. buy

We calculate the intrinsic value of FCN 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, %
  1.74
  2.50
  2.75
  2.97
  3.18
  3.36
  3.52
  3.67
  3.80
  3.92
  4.03
  4.13
  4.22
  4.29
  4.36
  4.43
  4.49
  4.54
  4.58
  4.62
  4.66
  4.70
  4.73
  4.75
  4.78
  4.80
  4.82
  4.84
  4.85
  4.87
  4.88
Revenue, $m
  1,810
  1,855
  1,906
  1,963
  2,025
  2,093
  2,167
  2,247
  2,332
  2,424
  2,521
  2,626
  2,736
  2,854
  2,978
  3,110
  3,250
  3,397
  3,553
  3,717
  3,890
  4,073
  4,266
  4,468
  4,682
  4,907
  5,143
  5,392
  5,654
  5,929
  6,218
Variable operating expenses, $m
 
  1,700
  1,744
  1,792
  1,845
  1,903
  1,966
  2,034
  2,107
  2,185
  2,268
  2,239
  2,333
  2,434
  2,540
  2,652
  2,771
  2,897
  3,030
  3,170
  3,318
  3,474
  3,638
  3,811
  3,993
  4,184
  4,386
  4,598
  4,822
  5,056
  5,303
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
  1,668
  1,700
  1,744
  1,792
  1,845
  1,903
  1,966
  2,034
  2,107
  2,185
  2,268
  2,239
  2,333
  2,434
  2,540
  2,652
  2,771
  2,897
  3,030
  3,170
  3,318
  3,474
  3,638
  3,811
  3,993
  4,184
  4,386
  4,598
  4,822
  5,056
  5,303
Operating income, $m
  142
  155
  163
  171
  180
  190
  201
  213
  225
  239
  253
  386
  403
  420
  438
  458
  478
  500
  523
  547
  573
  600
  628
  658
  689
  722
  757
  794
  832
  873
  915
EBITDA, $m
  191
  278
  286
  294
  303
  314
  325
  337
  349
  363
  378
  393
  410
  427
  446
  466
  487
  509
  532
  557
  583
  610
  639
  669
  701
  735
  770
  808
  847
  888
  932
Interest expense (income), $m
  23
  19
  21
  22
  24
  26
  28
  30
  32
  35
  38
  41
  44
  47
  51
  54
  58
  62
  67
  71
  76
  81
  87
  93
  99
  105
  112
  119
  126
  134
  142
Earnings before tax, $m
  128
  136
  142
  149
  156
  164
  173
  183
  193
  204
  215
  346
  359
  373
  388
  404
  420
  438
  456
  476
  496
  518
  541
  565
  590
  617
  645
  675
  706
  739
  773
Tax expense, $m
  42
  37
  38
  40
  42
  44
  47
  49
  52
  55
  58
  93
  97
  101
  105
  109
  113
  118
  123
  128
  134
  140
  146
  153
  159
  167
  174
  182
  191
  199
  209
Net income, $m
  86
  99
  104
  109
  114
  120
  126
  133
  141
  149
  157
  252
  262
  272
  283
  295
  307
  319
  333
  347
  362
  378
  395
  412
  431
  451
  471
  493
  515
  539
  564

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  216
  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
  2,225
  2,059
  2,116
  2,179
  2,248
  2,323
  2,405
  2,494
  2,588
  2,690
  2,798
  2,914
  3,037
  3,167
  3,305
  3,452
  3,607
  3,770
  3,943
  4,125
  4,318
  4,521
  4,734
  4,959
  5,196
  5,446
  5,708
  5,984
  6,275
  6,580
  6,902
Adjusted assets (=assets-cash), $m
  2,009
  2,059
  2,116
  2,179
  2,248
  2,323
  2,405
  2,494
  2,588
  2,690
  2,798
  2,914
  3,037
  3,167
  3,305
  3,452
  3,607
  3,770
  3,943
  4,125
  4,318
  4,521
  4,734
  4,959
  5,196
  5,446
  5,708
  5,984
  6,275
  6,580
  6,902
Revenue / Adjusted assets
  0.901
  0.901
  0.901
  0.901
  0.901
  0.901
  0.901
  0.901
  0.901
  0.901
  0.901
  0.901
  0.901
  0.901
  0.901
  0.901
  0.901
  0.901
  0.901
  0.901
  0.901
  0.901
  0.901
  0.901
  0.901
  0.901
  0.901
  0.901
  0.901
  0.901
  0.901
Average production assets, $m
  127
  130
  133
  137
  142
  147
  152
  157
  163
  170
  176
  184
  192
  200
  208
  218
  227
  238
  249
  260
  272
  285
  299
  313
  328
  343
  360
  377
  396
  415
  435
Working capital, $m
  405
  193
  198
  204
  211
  218
  225
  234
  243
  252
  262
  273
  285
  297
  310
  323
  338
  353
  369
  387
  405
  424
  444
  465
  487
  510
  535
  561
  588
  617
  647
Total debt, $m
  366
  392
  421
  453
  488
  526
  567
  612
  660
  712
  767
  825
  888
  954
  1,024
  1,098
  1,177
  1,260
  1,347
  1,440
  1,537
  1,640
  1,748
  1,862
  1,983
  2,109
  2,242
  2,382
  2,529
  2,684
  2,847
Total liabilities, $m
  1,018
  1,044
  1,073
  1,105
  1,140
  1,178
  1,219
  1,264
  1,312
  1,364
  1,419
  1,477
  1,540
  1,606
  1,676
  1,750
  1,829
  1,912
  1,999
  2,092
  2,189
  2,292
  2,400
  2,514
  2,635
  2,761
  2,894
  3,034
  3,181
  3,336
  3,499
Total equity, $m
  1,207
  1,015
  1,043
  1,074
  1,108
  1,145
  1,186
  1,229
  1,276
  1,326
  1,380
  1,437
  1,497
  1,561
  1,630
  1,702
  1,778
  1,859
  1,944
  2,034
  2,129
  2,229
  2,334
  2,445
  2,562
  2,685
  2,814
  2,950
  3,094
  3,244
  3,403
Total liabilities and equity, $m
  2,225
  2,059
  2,116
  2,179
  2,248
  2,323
  2,405
  2,493
  2,588
  2,690
  2,799
  2,914
  3,037
  3,167
  3,306
  3,452
  3,607
  3,771
  3,943
  4,126
  4,318
  4,521
  4,734
  4,959
  5,197
  5,446
  5,708
  5,984
  6,275
  6,580
  6,902
Debt-to-equity ratio
  0.303
  0.390
  0.400
  0.420
  0.440
  0.460
  0.480
  0.500
  0.520
  0.540
  0.560
  0.570
  0.590
  0.610
  0.630
  0.650
  0.660
  0.680
  0.690
  0.710
  0.720
  0.740
  0.750
  0.760
  0.770
  0.790
  0.800
  0.810
  0.820
  0.830
  0.840
Adjusted equity ratio
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  86
  99
  104
  109
  114
  120
  126
  133
  141
  149
  157
  252
  262
  272
  283
  295
  307
  319
  333
  347
  362
  378
  395
  412
  431
  451
  471
  493
  515
  539
  564
Depreciation, amort., depletion, $m
  49
  123
  123
  123
  123
  123
  124
  124
  124
  124
  125
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
Funds from operations, $m
  303
  222
  227
  232
  237
  243
  250
  257
  265
  273
  282
  259
  269
  280
  291
  303
  315
  328
  342
  357
  372
  389
  406
  424
  443
  463
  484
  507
  530
  555
  581
Change in working capital, $m
  70
  5
  5
  6
  6
  7
  8
  8
  9
  10
  10
  11
  12
  12
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
Cash from operations, $m
  233
  217
  221
  226
  231
  236
  242
  249
  256
  264
  272
  248
  258
  268
  278
  289
  301
  313
  326
  340
  354
  370
  386
  403
  421
  440
  460
  481
  503
  526
  550
Maintenance CAPEX, $m
  0
  -5
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
New CAPEX, $m
  -29
  -3
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
Cash from investing activities, $m
  -30
  -8
  -9
  -9
  -9
  -10
  -10
  -12
  -12
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -30
  -30
  -32
  -34
  -35
Free cash flow, $m
  203
  209
  213
  217
  221
  226
  232
  238
  244
  251
  259
  235
  243
  252
  262
  272
  283
  294
  306
  319
  333
  347
  362
  378
  394
  412
  430
  450
  470
  492
  515
Issuance/(repayment) of debt, $m
  -130
  26
  29
  32
  35
  38
  42
  45
  48
  51
  55
  59
  62
  66
  70
  74
  78
  83
  88
  92
  98
  103
  108
  114
  120
  126
  133
  140
  147
  155
  163
Issuance/(repurchase) of shares, $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
  0
Cash from financing (excl. dividends), $m  
  -125
  26
  29
  32
  35
  38
  42
  45
  48
  51
  55
  59
  62
  66
  70
  74
  78
  83
  88
  92
  98
  103
  108
  114
  120
  126
  133
  140
  147
  155
  163
Total cash flow (excl. dividends), $m
  66
  235
  241
  249
  256
  265
  273
  282
  292
  303
  313
  293
  305
  318
  332
  346
  361
  377
  394
  412
  430
  450
  470
  492
  515
  538
  564
  590
  618
  647
  678
Retained Cash Flow (-), $m
  -59
  -24
  -28
  -31
  -34
  -37
  -40
  -44
  -47
  -50
  -53
  -57
  -61
  -64
  -68
  -72
  -76
  -81
  -85
  -90
  -95
  -100
  -105
  -111
  -117
  -123
  -129
  -136
  -143
  -151
  -158
Prev. year cash balance distribution, $m
 
  216
  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
 
  427
  214
  218
  222
  227
  233
  239
  245
  252
  260
  236
  245
  254
  264
  274
  285
  297
  309
  322
  335
  350
  365
  381
  398
  415
  434
  454
  475
  496
  519
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
 
  409
  196
  189
  183
  176
  169
  161
  153
  145
  136
  112
  104
  97
  89
  80
  72
  65
  57
  50
  43
  36
  30
  25
  20
  16
  13
  10
  7
  5
  4
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

FTI Consulting, Inc. is a business advisory company. The Company operates through five segments: Corporate Finance & Restructuring, Forensic and Litigation Consulting, Economic Consulting, Technology and Strategic Communications. The Company provides advice and services, such as restructuring (including bankruptcy), capital formation and indebtedness, interim business management, performance improvements, forensic accounting and litigation matters, international arbitrations, mergers and acquisitions (M&A), antitrust and competition matters, securities litigation, electronic discovery (or e-discovery), management and retrieval of electronically stored information (ESI), reputation management and strategic communications. The Company collaborates with Chief Financial Officers (CFOs) and their finance and accounting organizations and uses engagement tools to provide transformation services, manage risk, deliver business intelligence capabilities, and prepare for and execute events.

FINANCIAL RATIOS  of  FTI Consulting (FCN)

Valuation Ratios
P/E Ratio 21.2
Price to Sales 1
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow 7.8
Price to Free Cash Flow 8.9
Growth Rates
Sales Growth Rate 1.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -6.5%
Cap. Spend. - 3 Yr. Gr. Rate -7.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 30.3%
Total Debt to Equity 30.3%
Interest Coverage 7
Management Effectiveness
Return On Assets 4.6%
Ret/ On Assets - 3 Yr. Avg. 4.1%
Return On Total Capital 5.3%
Ret/ On T. Cap. - 3 Yr. Avg. 4.2%
Return On Equity 7.3%
Return On Equity - 3 Yr. Avg. 6.2%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 33.1%
Gross Margin - 3 Yr. Avg. 34%
EBITDA Margin 11%
EBITDA Margin - 3 Yr. Avg. 11.1%
Operating Margin 7.8%
Oper. Margin - 3 Yr. Avg. 8.1%
Pre-Tax Margin 7.1%
Pre-Tax Margin - 3 Yr. Avg. 6.2%
Net Profit Margin 4.8%
Net Profit Margin - 3 Yr. Avg. 3.9%
Effective Tax Rate 32.8%
Eff/ Tax Rate - 3 Yr. Avg. 37.2%
Payout Ratio 0%

FCN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FCN stock intrinsic value calculation we used $1810 million for the last fiscal year's total revenue generated by FTI Consulting. The default revenue input number comes from 2016 income statement of FTI Consulting. 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 FCN stock valuation model: a) initial revenue growth rate of 2.5% 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 FCN is calculated based on our internal credit rating of FTI Consulting, 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 FTI Consulting.
    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 FCN stock the variable cost ratio is equal to 91.8%.

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 FCN 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 5.3% for FTI Consulting.

Corporate tax rate of 27% is the nominal tax rate for FTI Consulting. 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 FCN 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 FCN are equal to 7%.

Life of production assets of 26.8 years is the average useful life of capital assets used in FTI Consulting 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 FCN is equal to 10.4%. 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 - $1207 million for FTI Consulting - 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 38.175 million for FTI Consulting 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 FTI Consulting at the current share price and the inputted number of shares is $1.7 billion.

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COMPANY NEWS

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▶ FTI Consulting tops Street 3Q forecasts   [Oct-26-17 08:25AM  Associated Press]
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▶ FTI Consulting Announces Leadership Transitions   [Oct-03-17 07:30AM  GlobeNewswire]
▶ FTI Consulting and Exterro Announce E-Discovery Partnership   [Aug-29-17 07:30AM  GlobeNewswire]
▶ FTI Consulting Partners with kCura to Offer Relativity   [Aug-14-17 07:30AM  GlobeNewswire]
▶ FTI Capital Advisors Expands Presence to Canada   [Aug-09-17 07:30AM  GlobeNewswire]
▶ FTI Consulting reports 2Q loss   [01:44AM  Associated Press]
▶ FTI Consulting Acquires CDG Group   [Jul-06-17 07:30AM  GlobeNewswire]
▶ Navidea settles contested bill with PI that former CEO hired to investigate future CEO   [Jun-29-17 03:10PM  American City Business Journals]
Financial statements of FCN
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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