Intrinsic value of HRG Group - HRG

Previous Close

$17.37

  Intrinsic Value

$4.78

stock screener

  Rating & Target

str. sell

-72%

  Value-price divergence*

+1%

Previous close

$17.37

 
Intrinsic value

$4.78

 
Up/down potential

-72%

 
Rating

str. sell

 
Value-price divergence*

+1%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of HRG 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 3.5

 

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, %
  10.72
  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
  5,215
  5,319
  5,442
  5,581
  5,739
  5,912
  6,103
  6,311
  6,536
  6,779
  7,039
  7,317
  7,614
  7,930
  8,266
  8,623
  9,001
  9,401
  9,824
  10,271
  10,743
  11,241
  11,766
  12,319
  12,902
  13,517
  14,163
  14,844
  15,560
  16,314
  17,107
Variable operating expenses, $m
 
  5,219
  5,333
  5,464
  5,610
  5,773
  5,951
  6,146
  6,356
  6,582
  6,825
  6,838
  7,115
  7,411
  7,725
  8,058
  8,411
  8,785
  9,180
  9,598
  10,039
  10,504
  10,995
  11,512
  12,057
  12,631
  13,235
  13,872
  14,541
  15,245
  15,986
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
  4,587
  5,219
  5,333
  5,464
  5,610
  5,773
  5,951
  6,146
  6,356
  6,582
  6,825
  6,838
  7,115
  7,411
  7,725
  8,058
  8,411
  8,785
  9,180
  9,598
  10,039
  10,504
  10,995
  11,512
  12,057
  12,631
  13,235
  13,872
  14,541
  15,245
  15,986
Operating income, $m
  628
  101
  109
  118
  128
  140
  152
  166
  180
  196
  213
  479
  499
  520
  542
  565
  590
  616
  644
  673
  704
  736
  771
  807
  845
  886
  928
  973
  1,019
  1,069
  1,121
EBITDA, $m
  812
  451
  461
  473
  486
  501
  517
  535
  554
  574
  596
  620
  645
  672
  700
  730
  762
  796
  832
  870
  910
  952
  997
  1,043
  1,093
  1,145
  1,200
  1,257
  1,318
  1,382
  1,449
Interest expense (income), $m
  398
  380
  215
  267
  328
  396
  471
  553
  643
  740
  844
  957
  1,077
  1,205
  1,341
  1,486
  1,640
  1,803
  1,976
  2,158
  2,351
  2,555
  2,770
  2,996
  3,235
  3,487
  3,752
  4,031
  4,325
  4,634
  4,959
Earnings before tax, $m
  232
  -279
  -106
  -150
  -200
  -256
  -319
  -387
  -462
  -543
  -631
  -477
  -578
  -685
  -800
  -921
  -1,050
  -1,187
  -1,332
  -1,485
  -1,647
  -1,818
  -1,999
  -2,189
  -2,390
  -2,601
  -2,824
  -3,058
  -3,305
  -3,565
  -3,838
Tax expense, $m
  42
  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
Net income, $m
  -199
  -279
  -106
  -150
  -200
  -256
  -319
  -387
  -462
  -543
  -631
  -477
  -578
  -685
  -800
  -921
  -1,050
  -1,187
  -1,332
  -1,485
  -1,647
  -1,818
  -1,999
  -2,189
  -2,390
  -2,601
  -2,824
  -3,058
  -3,305
  -3,565
  -3,838

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  497
  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
  35,793
  36,434
  37,272
  38,229
  39,305
  40,496
  41,804
  43,228
  44,769
  46,429
  48,211
  50,117
  52,151
  54,317
  56,618
  59,061
  61,649
  64,389
  67,286
  70,347
  73,580
  76,990
  80,587
  84,378
  88,373
  92,580
  97,010
  101,672
  106,578
  111,740
  117,169
Adjusted assets (=assets-cash), $m
  35,296
  36,434
  37,272
  38,229
  39,305
  40,496
  41,804
  43,228
  44,769
  46,429
  48,211
  50,117
  52,151
  54,317
  56,618
  59,061
  61,649
  64,389
  67,286
  70,347
  73,580
  76,990
  80,587
  84,378
  88,373
  92,580
  97,010
  101,672
  106,578
  111,740
  117,169
Revenue / Adjusted assets
  0.148
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
Average production assets, $m
  2,953
  3,011
  3,080
  3,159
  3,248
  3,346
  3,455
  3,572
  3,700
  3,837
  3,984
  4,141
  4,310
  4,489
  4,679
  4,881
  5,094
  5,321
  5,560
  5,813
  6,080
  6,362
  6,659
  6,973
  7,303
  7,650
  8,016
  8,402
  8,807
  9,234
  9,682
Working capital, $m
  0
  -505
  -517
  -530
  -545
  -562
  -580
  -600
  -621
  -644
  -669
  -695
  -723
  -753
  -785
  -819
  -855
  -893
  -933
  -976
  -1,021
  -1,068
  -1,118
  -1,170
  -1,226
  -1,284
  -1,346
  -1,410
  -1,478
  -1,550
  -1,625
Total debt, $m
  5,431
  3,066
  3,820
  4,682
  5,650
  6,723
  7,899
  9,181
  10,568
  12,062
  13,666
  15,381
  17,212
  19,161
  21,233
  23,431
  25,760
  28,226
  30,833
  33,589
  36,498
  39,567
  42,804
  46,216
  49,812
  53,598
  57,585
  61,781
  66,196
  70,842
  75,728
Total liabilities, $m
  35,155
  32,790
  33,544
  34,406
  35,374
  36,447
  37,623
  38,905
  40,292
  41,786
  43,390
  45,105
  46,936
  48,885
  50,957
  53,155
  55,484
  57,950
  60,557
  63,313
  66,222
  69,291
  72,528
  75,940
  79,536
  83,322
  87,309
  91,505
  95,920
  100,566
  105,452
Total equity, $m
  638
  3,643
  3,727
  3,823
  3,930
  4,050
  4,180
  4,323
  4,477
  4,643
  4,821
  5,012
  5,215
  5,432
  5,662
  5,906
  6,165
  6,439
  6,729
  7,035
  7,358
  7,699
  8,059
  8,438
  8,837
  9,258
  9,701
  10,167
  10,658
  11,174
  11,717
Total liabilities and equity, $m
  35,793
  36,433
  37,271
  38,229
  39,304
  40,497
  41,803
  43,228
  44,769
  46,429
  48,211
  50,117
  52,151
  54,317
  56,619
  59,061
  61,649
  64,389
  67,286
  70,348
  73,580
  76,990
  80,587
  84,378
  88,373
  92,580
  97,010
  101,672
  106,578
  111,740
  117,169
Debt-to-equity ratio
  8.513
  0.840
  1.030
  1.220
  1.440
  1.660
  1.890
  2.120
  2.360
  2.600
  2.830
  3.070
  3.300
  3.530
  3.750
  3.970
  4.180
  4.380
  4.580
  4.770
  4.960
  5.140
  5.310
  5.480
  5.640
  5.790
  5.940
  6.080
  6.210
  6.340
  6.460
Adjusted equity ratio
  0.004
  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
  -199
  -279
  -106
  -150
  -200
  -256
  -319
  -387
  -462
  -543
  -631
  -477
  -578
  -685
  -800
  -921
  -1,050
  -1,187
  -1,332
  -1,485
  -1,647
  -1,818
  -1,999
  -2,189
  -2,390
  -2,601
  -2,824
  -3,058
  -3,305
  -3,565
  -3,838
Depreciation, amort., depletion, $m
  184
  350
  352
  355
  358
  361
  365
  369
  373
  378
  383
  140
  146
  152
  159
  165
  173
  180
  188
  197
  206
  216
  226
  236
  248
  259
  272
  285
  299
  313
  328
Funds from operations, $m
  649
  70
  246
  205
  158
  105
  46
  -18
  -89
  -166
  -248
  -337
  -432
  -533
  -641
  -756
  -878
  -1,007
  -1,144
  -1,288
  -1,441
  -1,603
  -1,773
  -1,953
  -2,142
  -2,342
  -2,552
  -2,774
  -3,007
  -3,252
  -3,510
Change in working capital, $m
  69
  -10
  -12
  -13
  -15
  -17
  -18
  -20
  -21
  -23
  -25
  -26
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -45
  -47
  -50
  -53
  -55
  -58
  -61
  -65
  -68
  -72
  -75
Cash from operations, $m
  580
  80
  258
  219
  173
  122
  65
  1
  -68
  -143
  -223
  -310
  -404
  -503
  -609
  -722
  -842
  -969
  -1,104
  -1,246
  -1,396
  -1,555
  -1,723
  -1,900
  -2,087
  -2,284
  -2,491
  -2,709
  -2,939
  -3,180
  -3,435
Maintenance CAPEX, $m
  0
  -100
  -102
  -104
  -107
  -110
  -113
  -117
  -121
  -125
  -130
  -135
  -140
  -146
  -152
  -159
  -165
  -173
  -180
  -188
  -197
  -206
  -216
  -226
  -236
  -248
  -259
  -272
  -285
  -299
  -313
New CAPEX, $m
  -95
  -58
  -69
  -79
  -89
  -98
  -108
  -118
  -127
  -137
  -147
  -158
  -168
  -179
  -190
  -202
  -214
  -226
  -239
  -253
  -267
  -282
  -297
  -313
  -330
  -348
  -366
  -385
  -405
  -427
  -449
Cash from investing activities, $m
  -891
  -158
  -171
  -183
  -196
  -208
  -221
  -235
  -248
  -262
  -277
  -293
  -308
  -325
  -342
  -361
  -379
  -399
  -419
  -441
  -464
  -488
  -513
  -539
  -566
  -596
  -625
  -657
  -690
  -726
  -762
Free cash flow, $m
  -311
  -78
  87
  35
  -23
  -87
  -157
  -233
  -316
  -405
  -501
  -603
  -712
  -828
  -952
  -1,082
  -1,221
  -1,368
  -1,523
  -1,687
  -1,861
  -2,043
  -2,236
  -2,439
  -2,653
  -2,879
  -3,116
  -3,366
  -3,629
  -3,905
  -4,196
Issuance/(repayment) of debt, $m
  -606
  -2,365
  754
  862
  968
  1,072
  1,177
  1,281
  1,387
  1,494
  1,604
  1,716
  1,831
  1,949
  2,071
  2,198
  2,329
  2,466
  2,608
  2,755
  2,909
  3,070
  3,237
  3,412
  3,595
  3,786
  3,987
  4,196
  4,416
  4,645
  4,886
Issuance/(repurchase) of shares, $m
  0
  3,285
  190
  245
  307
  375
  449
  530
  616
  709
  809
  668
  781
  902
  1,030
  1,166
  1,309
  1,461
  1,622
  1,792
  1,971
  2,159
  2,359
  2,568
  2,789
  3,022
  3,267
  3,525
  3,796
  4,081
  4,381
Cash from financing (excl. dividends), $m  
  149
  920
  944
  1,107
  1,275
  1,447
  1,626
  1,811
  2,003
  2,203
  2,413
  2,384
  2,612
  2,851
  3,101
  3,364
  3,638
  3,927
  4,230
  4,547
  4,880
  5,229
  5,596
  5,980
  6,384
  6,808
  7,254
  7,721
  8,212
  8,726
  9,267
Total cash flow (excl. dividends), $m
  -164
  843
  1,030
  1,142
  1,252
  1,361
  1,469
  1,578
  1,687
  1,799
  1,912
  1,780
  1,900
  2,023
  2,150
  2,281
  2,418
  2,559
  2,706
  2,859
  3,019
  3,186
  3,360
  3,541
  3,731
  3,930
  4,137
  4,355
  4,583
  4,821
  5,071
Retained Cash Flow (-), $m
  -51
  -3,285
  -190
  -245
  -307
  -375
  -449
  -530
  -616
  -709
  -809
  -668
  -781
  -902
  -1,030
  -1,166
  -1,309
  -1,461
  -1,622
  -1,792
  -1,971
  -2,159
  -2,359
  -2,568
  -2,789
  -3,022
  -3,267
  -3,525
  -3,796
  -4,081
  -4,381
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
 
  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
 
  -2,442
  841
  897
  945
  986
  1,020
  1,048
  1,071
  1,089
  1,103
  1,113
  1,119
  1,121
  1,120
  1,116
  1,108
  1,098
  1,084
  1,068
  1,048
  1,026
  1,001
  973
  942
  908
  871
  830
  787
  740
  690
Discount rate, %
 
  12.20
  12.81
  13.45
  14.12
  14.83
  15.57
  16.35
  17.17
  18.02
  18.93
  19.87
  20.87
  21.91
  23.00
  24.16
  25.36
  26.63
  27.96
  29.36
  30.83
  32.37
  33.99
  35.69
  37.47
  39.35
  41.31
  43.38
  45.55
  47.83
  50.22
PV of cash for distribution, $m
 
  -2,177
  661
  614
  557
  494
  428
  363
  302
  245
  195
  152
  115
  85
  62
  43
  30
  20
  13
  8
  5
  3
  2
  1
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  51.4
  50.9
  50.3
  49.5
  48.7
  47.7
  46.6
  45.4
  44.2
  42.8
  41.7
  40.6
  39.3
  38.0
  36.6
  35.2
  33.7
  32.2
  30.7
  29.2
  27.7
  26.2
  24.8
  23.4
  22.0
  20.6
  19.3
  18.1
  16.9
  15.8

HRG Group, Inc., through its subsidiaries, provides various branded consumer products. It operates through two segments, Consumer Products and Insurance. Its product portfolio includes consumer batteries, such as alkaline and zinc carbon batteries, nickel metal hydride rechargeable batteries, battery chargers, battery-powered portable lighting products, hearing aid batteries, and other specialty battery products; small appliances comprising small kitchen appliances and home product appliances; and personal care products, such as electric shaving and grooming products, and other personal care products. The company’s product portfolio also comprises hardware and home improvement products, including residential locksets, door hardware, and plumbing products; pet supplies consisting of aquatics, companion animals, and pet food products; home and garden improvement products, such as outdoor insect and weed control solutions, animal repellents, household pest control solutions, and personal use pesticides for protection from various outdoor nuisance pests; and auto care products, including automotive aftermarket appearance, performance chemicals, and do-it-yourself automotive air conditioner recharge products. The company sells its products through retailers, wholesalers and distributors, construction companies, hearing aid professionals, industrial distributors, and original equipment manufacturers in approximately 160 countries in the North America, Europe, the Middle East, Africa, Latin America, and the Asia-Pacific. In addition, it provides life insurance and annuity products through independent agents and managing general agents; and long-term reinsurance to specialty insurance sector of fixed, deferred, and payout annuities. The company was formerly known as Harbinger Group Inc. and changed its name to HRG Group, Inc. in March 2015. HRG Group, Inc. was founded in 1954 and is headquartered in New York, New York.

FINANCIAL RATIOS  of  HRG Group (HRG)

Valuation Ratios
P/E Ratio -17.5
Price to Sales 0.7
Price to Book 5.5
Price to Tangible Book
Price to Cash Flow 6
Price to Free Cash Flow 7.2
Growth Rates
Sales Growth Rate 10.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 4.4%
Cap. Spend. - 3 Yr. Gr. Rate -1%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 851.3%
Total Debt to Equity 851.3%
Interest Coverage 2
Management Effectiveness
Return On Assets 0.4%
Ret/ On Assets - 3 Yr. Avg. -0%
Return On Total Capital -3.1%
Ret/ On T. Cap. - 3 Yr. Avg. -3.9%
Return On Equity -32.5%
Return On Equity - 3 Yr. Avg. -29.4%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 40.2%
Gross Margin - 3 Yr. Avg. 37.8%
EBITDA Margin 15.6%
EBITDA Margin - 3 Yr. Avg. 10.9%
Operating Margin 12%
Oper. Margin - 3 Yr. Avg. 7.7%
Pre-Tax Margin 4.4%
Pre-Tax Margin - 3 Yr. Avg. 0.1%
Net Profit Margin -3.8%
Net Profit Margin - 3 Yr. Avg. -5.3%
Effective Tax Rate 18.1%
Eff/ Tax Rate - 3 Yr. Avg. 36.6%
Payout Ratio 0%

HRG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HRG stock intrinsic value calculation we used $5215 million for the last fiscal year's total revenue generated by HRG Group. The default revenue input number comes from 2016 income statement of HRG Group. 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 HRG 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 12.2%, whose default value for HRG is calculated based on our internal credit rating of HRG Group, 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 HRG Group.
    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 HRG stock the variable cost ratio is equal to 98.2%.

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 HRG 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 7% for HRG Group.

Corporate tax rate of 27% is the nominal tax rate for HRG Group. 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 HRG 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 HRG are equal to 56.6%.

Life of production assets of 29.5 years is the average useful life of capital assets used in HRG Group 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 HRG is equal to -9.5%. 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 - $638 million for HRG Group - 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 199.785 million for HRG Group 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 HRG Group at the current share price and the inputted number of shares is $3.5 billion.

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COMPANY NEWS

▶ Falcone on Vietnam Investment, Hedge Funds, Steven Cohen   [May-30-17 02:08PM  Bloomberg Video]
▶ [$$] CF Corp to Buy Fidelity & Guaranty Life   [May-24-17 08:44AM  The Wall Street Journal]
▶ HRG reports 2Q loss   [May-05-17 04:55PM  Associated Press]
▶ HRG Group, Inc. Value Analysis (NYSE:HRG) : May 4, 2017   [May-04-17 04:50PM  Capital Cube]
▶ HRG posts 1Q profit   [Feb-07-17 06:41PM  Associated Press]
▶ Is Hydroponics the Next Big Thing for Scotts Miracle-Gro?   [Feb-02-17 10:37AM  Market Realist]
▶ How Scotts Miracle-Gro Fared in 1Q17   [Feb-01-17 05:24PM  Market Realist]
▶ How Does Consumer Sentiment Increase Overall Activity?   [Jan-31-17 07:40AM  Market Realist]
▶ Do Hedge Funds Love HRG Group Inc (HRG)?   [Dec-08-16 03:15AM  at Insider Monkey]
▶ George Soros Stock Picks Got Whupped By His Sons In Q3   [Nov-07-16 03:19PM  at Insider Monkey]
▶ Term Sheet Wednesday, July 6   [09:53AM  at Fortune]
Stock chart of HRG Financial statements of HRG Annual reports of HRG
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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