Intrinsic value of Forrester Research - FORR

Previous Close

$46.15

  Intrinsic Value

$43.14

stock screener

  Rating & Target

hold

-7%

Previous close

$46.15

 
Intrinsic value

$43.14

 
Up/down potential

-7%

 
Rating

hold

We calculate the intrinsic value of FORR 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

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 0.8

 

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, %
  3.82
  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
  4.87
Revenue, $m
  326
  333
  342
  352
  362
  374
  387
  401
  415
  431
  448
  467
  486
  507
  528
  552
  576
  602
  629
  658
  689
  721
  755
  791
  828
  868
  910
  954
  1,000
  1,048
  1,099
Variable operating expenses, $m
 
  62
  64
  65
  67
  69
  71
  73
  76
  78
  81
  77
  80
  83
  87
  91
  95
  99
  104
  108
  113
  119
  124
  130
  136
  143
  150
  157
  165
  173
  181
Fixed operating expenses, $m
 
  248
  254
  261
  267
  274
  281
  288
  295
  302
  310
  318
  325
  334
  342
  350
  359
  368
  377
  387
  397
  406
  417
  427
  438
  449
  460
  471
  483
  495
  508
Total operating expenses, $m
  295
  310
  318
  326
  334
  343
  352
  361
  371
  380
  391
  395
  405
  417
  429
  441
  454
  467
  481
  495
  510
  525
  541
  557
  574
  592
  610
  628
  648
  668
  689
Operating income, $m
  31
  23
  24
  26
  28
  31
  35
  40
  45
  51
  58
  72
  81
  90
  100
  110
  122
  135
  148
  163
  179
  196
  214
  234
  254
  276
  300
  325
  352
  381
  411
EBITDA, $m
  40
  33
  34
  36
  38
  41
  45
  50
  55
  61
  68
  76
  84
  93
  103
  114
  126
  139
  153
  168
  184
  201
  220
  239
  260
  283
  307
  332
  360
  388
  419
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  2
  2
  2
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  9
  9
  10
  11
  12
  13
  14
Earnings before tax, $m
  31
  23
  24
  26
  28
  31
  35
  39
  44
  49
  56
  70
  78
  87
  96
  107
  118
  130
  143
  158
  173
  189
  207
  226
  246
  267
  290
  314
  340
  368
  397
Tax expense, $m
  13
  6
  7
  7
  8
  8
  9
  10
  12
  13
  15
  19
  21
  23
  26
  29
  32
  35
  39
  43
  47
  51
  56
  61
  66
  72
  78
  85
  92
  99
  107
Net income, $m
  18
  17
  18
  19
  20
  23
  25
  28
  32
  36
  41
  51
  57
  63
  70
  78
  86
  95
  105
  115
  126
  138
  151
  165
  179
  195
  212
  230
  248
  269
  290

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  138
  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
  336
  203
  208
  214
  220
  227
  235
  243
  252
  262
  272
  283
  295
  308
  321
  335
  350
  366
  382
  400
  419
  438
  459
  480
  503
  527
  553
  579
  607
  637
  668
Adjusted assets (=assets-cash), $m
  198
  203
  208
  214
  220
  227
  235
  243
  252
  262
  272
  283
  295
  308
  321
  335
  350
  366
  382
  400
  419
  438
  459
  480
  503
  527
  553
  579
  607
  637
  668
Revenue / Adjusted assets
  1.646
  1.640
  1.644
  1.645
  1.645
  1.648
  1.647
  1.650
  1.647
  1.645
  1.647
  1.650
  1.647
  1.646
  1.645
  1.648
  1.646
  1.645
  1.647
  1.645
  1.644
  1.646
  1.645
  1.648
  1.646
  1.647
  1.646
  1.648
  1.647
  1.645
  1.645
Average production assets, $m
  27
  28
  28
  29
  30
  31
  32
  33
  34
  36
  37
  39
  40
  42
  44
  46
  48
  50
  52
  55
  57
  60
  63
  66
  69
  72
  76
  79
  83
  87
  91
Working capital, $m
  46
  -94
  -96
  -99
  -102
  -105
  -109
  -113
  -117
  -122
  -126
  -132
  -137
  -143
  -149
  -156
  -162
  -170
  -178
  -186
  -194
  -203
  -213
  -223
  -234
  -245
  -257
  -269
  -282
  -296
  -310
Total debt, $m
  0
  -4
  1
  6
  12
  19
  25
  33
  41
  50
  59
  69
  80
  91
  103
  116
  129
  143
  158
  174
  191
  208
  227
  246
  267
  289
  311
  335
  361
  387
  415
Total liabilities, $m
  186
  182
  187
  192
  198
  205
  211
  219
  227
  236
  245
  255
  266
  277
  289
  302
  315
  329
  344
  360
  377
  394
  413
  432
  453
  475
  497
  521
  547
  573
  601
Total equity, $m
  150
  20
  21
  21
  22
  23
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
  48
  50
  53
  55
  58
  61
  64
  67
Total liabilities and equity, $m
  336
  202
  208
  213
  220
  228
  234
  243
  252
  262
  272
  283
  296
  308
  321
  336
  350
  366
  382
  400
  419
  438
  459
  480
  503
  528
  552
  579
  608
  637
  668
Debt-to-equity ratio
  0.000
  -0.180
  0.050
  0.290
  0.550
  0.820
  1.080
  1.360
  1.630
  1.900
  2.170
  2.440
  2.700
  2.960
  3.210
  3.450
  3.690
  3.910
  4.140
  4.350
  4.560
  4.750
  4.940
  5.130
  5.300
  5.470
  5.630
  5.790
  5.940
  6.080
  6.220
Adjusted equity ratio
  0.061
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  18
  17
  18
  19
  20
  23
  25
  28
  32
  36
  41
  51
  57
  63
  70
  78
  86
  95
  105
  115
  126
  138
  151
  165
  179
  195
  212
  230
  248
  269
  290
Depreciation, amort., depletion, $m
  9
  10
  10
  10
  10
  10
  10
  10
  10
  10
  11
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
Funds from operations, $m
  46
  27
  28
  29
  30
  33
  35
  39
  42
  47
  51
  55
  61
  67
  74
  82
  90
  100
  109
  120
  131
  143
  157
  171
  185
  201
  218
  237
  256
  276
  298
Change in working capital, $m
  4
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
Cash from operations, $m
  42
  29
  30
  31
  33
  36
  39
  42
  47
  51
  56
  60
  66
  73
  80
  89
  97
  107
  117
  128
  140
  153
  166
  181
  196
  213
  230
  249
  269
  290
  313
Maintenance CAPEX, $m
  0
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
New CAPEX, $m
  -4
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
Cash from investing activities, $m
  -18
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -6
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -9
  -11
  -11
  -11
  -12
Free cash flow, $m
  24
  26
  27
  28
  30
  32
  35
  38
  42
  47
  52
  55
  61
  68
  75
  83
  91
  100
  110
  121
  132
  145
  158
  172
  187
  203
  220
  239
  258
  279
  301
Issuance/(repayment) of debt, $m
  0
  -4
  5
  5
  6
  6
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
Issuance/(repurchase) of shares, $m
  15
  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  
  16
  -4
  5
  5
  6
  6
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
Total cash flow (excl. dividends), $m
  37
  22
  32
  33
  36
  39
  42
  46
  50
  55
  61
  65
  72
  79
  87
  95
  105
  115
  125
  137
  149
  162
  177
  192
  208
  225
  243
  263
  283
  305
  329
Retained Cash Flow (-), $m
  -23
  -8
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
Prev. year cash balance distribution, $m
 
  138
  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
 
  152
  31
  33
  35
  38
  41
  45
  50
  54
  60
  64
  70
  78
  85
  94
  103
  113
  124
  135
  147
  160
  174
  189
  205
  222
  241
  260
  280
  302
  325
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
 
  146
  28
  29
  29
  29
  30
  31
  31
  31
  31
  30
  30
  30
  29
  28
  26
  25
  23
  21
  19
  17
  14
  12
  10
  9
  7
  6
  4
  3
  2
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
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Forrester Research, Inc. (Forrester) is an independent research, data, and advisory services firm. The Company offers research, data, advisory and related services that are thematic, prescriptive and executable, and that provide a perspective on the changing business environment. Its segments include Research, Product and Project Consulting. The Research segment is responsible for writing the research and performing the Webinars and inquiries for its Research and Connect products. The Product segment includes the product management organization that is responsible for product pricing and packaging and the launch of new products. In addition, this segment includes its Data, Connect and Events organizations. The Project Consulting segment offers project consulting services. Its products and services are categorized into Forrester Research, Forrester Connect, Forrester Data, Forrester Consulting and Forrester Events.

FINANCIAL RATIOS  of  Forrester Research (FORR)

Valuation Ratios
P/E Ratio 47.1
Price to Sales 2.6
Price to Book 5.6
Price to Tangible Book
Price to Cash Flow 20.2
Price to Free Cash Flow 22.3
Growth Rates
Sales Growth Rate 3.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate 5.9%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 5.5%
Ret/ On Assets - 3 Yr. Avg. 4.1%
Return On Total Capital 13%
Ret/ On T. Cap. - 3 Yr. Avg. 9.4%
Return On Equity 13%
Return On Equity - 3 Yr. Avg. 9.4%
Asset Turnover 1
Profitability Ratios
Gross Margin 60.7%
Gross Margin - 3 Yr. Avg. 60%
EBITDA Margin 12.3%
EBITDA Margin - 3 Yr. Avg. 10.2%
Operating Margin 9.5%
Oper. Margin - 3 Yr. Avg. 7.1%
Pre-Tax Margin 9.5%
Pre-Tax Margin - 3 Yr. Avg. 7.1%
Net Profit Margin 5.5%
Net Profit Margin - 3 Yr. Avg. 4.3%
Effective Tax Rate 41.9%
Eff/ Tax Rate - 3 Yr. Avg. 39.2%
Payout Ratio 72.2%

FORR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FORR stock intrinsic value calculation we used $326 million for the last fiscal year's total revenue generated by Forrester Research. The default revenue input number comes from 2016 income statement of Forrester Research. 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 FORR stock valuation model: a) initial revenue growth rate of 2.3% 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 FORR is calculated based on our internal credit rating of Forrester Research, 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 Forrester Research.
    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 FORR stock the variable cost ratio is equal to 18.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $242 million in the base year in the intrinsic value calculation for FORR 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 Forrester Research.

Corporate tax rate of 27% is the nominal tax rate for Forrester Research. 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 FORR 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 FORR are equal to 8.3%.

Life of production assets of 11.2 years is the average useful life of capital assets used in Forrester Research 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 FORR is equal to -28.2%. 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 - $150 million for Forrester Research - 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 17.734 million for Forrester Research 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 Forrester Research at the current share price and the inputted number of shares is $0.8 billion.

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COMPANY NEWS

▶ Forrester Releases 2018 Predictions   [Nov-13-17 08:00PM  PR Newswire]
▶ Forrester Releases 2018 Predictions   [Nov-06-17 10:46AM  PR Newswire]
▶ Forrester Analyst Says iPhone X Demand Remains Strong   [Nov-02-17 05:48PM  Bloomberg Video]
▶ Forrester Research posts 3Q profit   [Oct-25-17 06:07PM  Associated Press]
▶ [$$] Forrester Hack Shows Criminals Turning Their Sights on Data   [Oct-10-17 07:12AM  The Wall Street Journal]
▶ Forrester website hacked for financial research   [Oct-06-17 06:56PM  MarketWatch]
▶ Forrester Launches Tap   [10:47AM  PR Newswire]
▶ Forrester's Ask Says Consumers Will Like iPhone X Camera   [Sep-12-17 05:35PM  Bloomberg Video]
▶ Forrester Analyst Says Time to 'Up the Ante' on iPhone   [Sep-01-17 03:31PM  Bloomberg Video]
▶ Forrester Research posts 2Q profit   [Jul-26-17 11:04PM  Associated Press]
▶ Forrester Research Names New Chief Sales Officer   [Jul-11-17 04:05PM  PR Newswire]
▶ Is Your Job Safe From the Rise of the Robots?   [Jun-04-17 09:24AM  Motley Fool]
▶ Forrester Research Names New Board Members   [May-31-17 04:05PM  PR Newswire]
▶ Dissecting Amazon's 1st-Qtr Earnings and Global Strategy   [Apr-27-17 07:12PM  Bloomberg Video]
▶ Full Show: Bloomberg Technology (04/26)   [Apr-26-17 08:36PM  Bloomberg]
▶ Forrester Research posts 1Q profit   [06:14PM  Associated Press]
▶ Marketers' Adoption of Virtual Reality Still Years Away   [Feb-13-17 06:15PM  The Wall Street Journal]
▶ Forrester Research posts 4Q profit   [05:51PM  Associated Press]
▶ Publicly traded company announces new Nashville office, 120 jobs   [Jan-25-17 01:28PM  at bizjournals.com]
▶ Full Show: Bloomberg Technology (11/16)   [Nov-16-16 11:03PM  at Bloomberg]
▶ Two KC agencies make Forrester's top lead agency list   [Nov-09-16 11:00AM  at bizjournals.com]
Financial statements of FORR
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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