Intrinsic value of Huron Consulting Group - HURN

Previous Close

$31.80

  Intrinsic Value

$86.79

stock screener

  Rating & Target

str. buy

+173%

  Value-price divergence*

+5%

Previous close

$31.80

 
Intrinsic value

$86.79

 
Up/down potential

+173%

 
Rating

str. buy

 
Value-price divergence*

+5%

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

We calculate the intrinsic value of HURN 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 0.7

 

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, %
  3.77
  4.60
  4.64
  4.68
  4.71
  4.74
  4.76
  4.79
  4.81
  4.83
  4.85
  4.86
  4.87
  4.89
  4.90
  4.91
  4.92
  4.93
  4.93
  4.94
  4.95
  4.95
  4.96
  4.96
  4.96
  4.97
  4.97
  4.97
  4.98
  4.98
  4.98
Revenue, $m
  798
  835
  873
  914
  957
  1,003
  1,050
  1,101
  1,154
  1,209
  1,268
  1,330
  1,394
  1,463
  1,534
  1,609
  1,689
  1,772
  1,859
  1,951
  2,048
  2,149
  2,255
  2,367
  2,485
  2,608
  2,738
  2,874
  3,017
  3,167
  3,325
Variable operating expenses, $m
 
  719
  749
  780
  813
  848
  884
  923
  963
  1,006
  1,051
  1,018
  1,068
  1,120
  1,175
  1,232
  1,293
  1,357
  1,424
  1,494
  1,568
  1,646
  1,727
  1,813
  1,903
  1,997
  2,097
  2,201
  2,310
  2,425
  2,546
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
  724
  719
  749
  780
  813
  848
  884
  923
  963
  1,006
  1,051
  1,018
  1,068
  1,120
  1,175
  1,232
  1,293
  1,357
  1,424
  1,494
  1,568
  1,646
  1,727
  1,813
  1,903
  1,997
  2,097
  2,201
  2,310
  2,425
  2,546
Operating income, $m
  74
  116
  125
  134
  144
  155
  166
  178
  190
  203
  217
  311
  327
  343
  359
  377
  396
  415
  436
  457
  480
  503
  528
  555
  582
  611
  641
  673
  707
  742
  779
EBITDA, $m
  121
  201
  211
  221
  231
  242
  253
  266
  278
  292
  306
  321
  336
  353
  370
  388
  407
  427
  448
  471
  494
  518
  544
  571
  599
  629
  660
  693
  728
  764
  802
Interest expense (income), $m
  6
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  21
  22
  23
  25
  27
  28
  30
  32
  34
  36
  38
  40
  43
  45
  48
  50
  53
  56
  59
  63
Earnings before tax, $m
  59
  105
  114
  122
  131
  141
  151
  162
  173
  185
  198
  291
  305
  319
  334
  350
  367
  385
  404
  423
  444
  465
  488
  512
  537
  563
  591
  620
  650
  682
  716
Tax expense, $m
  20
  28
  31
  33
  35
  38
  41
  44
  47
  50
  53
  79
  82
  86
  90
  95
  99
  104
  109
  114
  120
  126
  132
  138
  145
  152
  160
  167
  176
  184
  193
Net income, $m
  38
  77
  83
  89
  96
  103
  110
  118
  126
  135
  144
  212
  222
  233
  244
  256
  268
  281
  295
  309
  324
  340
  356
  374
  392
  411
  431
  453
  475
  498
  523

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  17
  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
  1,153
  1,189
  1,244
  1,302
  1,364
  1,428
  1,496
  1,568
  1,643
  1,723
  1,806
  1,894
  1,986
  2,083
  2,185
  2,293
  2,405
  2,524
  2,648
  2,779
  2,917
  3,061
  3,213
  3,372
  3,540
  3,716
  3,900
  4,094
  4,298
  4,512
  4,737
Adjusted assets (=assets-cash), $m
  1,136
  1,189
  1,244
  1,302
  1,364
  1,428
  1,496
  1,568
  1,643
  1,723
  1,806
  1,894
  1,986
  2,083
  2,185
  2,293
  2,405
  2,524
  2,648
  2,779
  2,917
  3,061
  3,213
  3,372
  3,540
  3,716
  3,900
  4,094
  4,298
  4,512
  4,737
Revenue / Adjusted assets
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
Average production assets, $m
  104
  109
  114
  119
  124
  130
  137
  143
  150
  157
  165
  173
  181
  190
  199
  209
  220
  230
  242
  254
  266
  279
  293
  308
  323
  339
  356
  374
  392
  412
  432
Working capital, $m
  44
  28
  30
  31
  33
  34
  36
  37
  39
  41
  43
  45
  47
  50
  52
  55
  57
  60
  63
  66
  70
  73
  77
  80
  84
  89
  93
  98
  103
  108
  113
Total debt, $m
  292
  316
  341
  367
  394
  423
  453
  485
  518
  554
  591
  630
  671
  714
  760
  807
  857
  910
  966
  1,024
  1,085
  1,149
  1,217
  1,288
  1,362
  1,440
  1,523
  1,609
  1,700
  1,795
  1,895
Total liabilities, $m
  505
  529
  554
  580
  607
  636
  666
  698
  731
  767
  804
  843
  884
  927
  973
  1,020
  1,070
  1,123
  1,179
  1,237
  1,298
  1,362
  1,430
  1,501
  1,575
  1,653
  1,736
  1,822
  1,913
  2,008
  2,108
Total equity, $m
  648
  660
  691
  723
  757
  793
  830
  870
  912
  956
  1,002
  1,051
  1,102
  1,156
  1,213
  1,272
  1,335
  1,401
  1,470
  1,543
  1,619
  1,699
  1,783
  1,872
  1,965
  2,062
  2,165
  2,272
  2,385
  2,504
  2,629
Total liabilities and equity, $m
  1,153
  1,189
  1,245
  1,303
  1,364
  1,429
  1,496
  1,568
  1,643
  1,723
  1,806
  1,894
  1,986
  2,083
  2,186
  2,292
  2,405
  2,524
  2,649
  2,780
  2,917
  3,061
  3,213
  3,373
  3,540
  3,715
  3,901
  4,094
  4,298
  4,512
  4,737
Debt-to-equity ratio
  0.451
  0.480
  0.490
  0.510
  0.520
  0.530
  0.550
  0.560
  0.570
  0.580
  0.590
  0.600
  0.610
  0.620
  0.630
  0.630
  0.640
  0.650
  0.660
  0.660
  0.670
  0.680
  0.680
  0.690
  0.690
  0.700
  0.700
  0.710
  0.710
  0.720
  0.720
Adjusted equity ratio
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555
  0.555

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  38
  77
  83
  89
  96
  103
  110
  118
  126
  135
  144
  212
  222
  233
  244
  256
  268
  281
  295
  309
  324
  340
  356
  374
  392
  411
  431
  453
  475
  498
  523
Depreciation, amort., depletion, $m
  47
  86
  86
  86
  87
  87
  87
  88
  88
  88
  89
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
Funds from operations, $m
  143
  163
  169
  176
  183
  190
  198
  206
  215
  224
  233
  222
  232
  243
  255
  267
  280
  293
  308
  323
  338
  355
  372
  390
  409
  429
  450
  473
  496
  520
  546
Change in working capital, $m
  15
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
Cash from operations, $m
  128
  161
  168
  174
  181
  188
  196
  204
  213
  222
  231
  219
  230
  241
  252
  264
  277
  291
  305
  319
  335
  351
  368
  386
  405
  425
  446
  468
  491
  515
  541
Maintenance CAPEX, $m
  0
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
New CAPEX, $m
  -15
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
Cash from investing activities, $m
  -87
  -11
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -17
  -19
  -19
  -21
  -21
  -23
  -23
  -25
  -27
  -27
  -29
  -31
  -31
  -33
  -35
  -37
  -39
  -41
  -43
Free cash flow, $m
  41
  151
  157
  163
  169
  176
  183
  190
  198
  206
  215
  203
  212
  222
  233
  244
  256
  268
  281
  295
  309
  324
  340
  356
  374
  392
  411
  431
  452
  475
  498
Issuance/(repayment) of debt, $m
  -24
  24
  25
  26
  27
  29
  30
  32
  34
  35
  37
  39
  41
  43
  45
  48
  50
  53
  55
  58
  61
  64
  68
  71
  75
  78
  82
  86
  91
  95
  100
Issuance/(repurchase) of shares, $m
  -60
  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  
  -83
  24
  25
  26
  27
  29
  30
  32
  34
  35
  37
  39
  41
  43
  45
  48
  50
  53
  55
  58
  61
  64
  68
  71
  75
  78
  82
  86
  91
  95
  100
Total cash flow (excl. dividends), $m
  -41
  175
  181
  189
  196
  205
  213
  222
  232
  242
  252
  242
  253
  265
  278
  292
  306
  321
  336
  353
  370
  388
  407
  427
  448
  470
  493
  518
  543
  570
  598
Retained Cash Flow (-), $m
  4
  -29
  -31
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -49
  -51
  -54
  -57
  -60
  -63
  -66
  -69
  -73
  -76
  -80
  -84
  -88
  -93
  -98
  -103
  -108
  -113
  -119
  -125
Prev. year cash balance distribution, $m
 
  17
  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
 
  164
  151
  156
  162
  169
  175
  182
  190
  198
  206
  193
  202
  212
  222
  232
  243
  255
  267
  280
  294
  308
  323
  339
  355
  372
  391
  410
  430
  451
  473
Discount rate, %
 
  5.30
  5.57
  5.84
  6.14
  6.44
  6.76
  7.10
  7.46
  7.83
  8.22
  8.63
  9.06
  9.52
  9.99
  10.49
  11.02
  11.57
  12.15
  12.76
  13.39
  14.06
  14.77
  15.50
  16.28
  17.09
  17.95
  18.85
  19.79
  20.78
  21.82
PV of cash for distribution, $m
 
  155
  135
  132
  128
  124
  118
  113
  107
  100
  93
  78
  71
  65
  58
  52
  46
  40
  34
  29
  24
  19
  16
  12
  10
  7
  5
  4
  3
  2
  1
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

Huron Consulting Group Inc., a professional services firm, provides advisory, technology, and analytic solutions in the United States and internationally. The company operates through the Healthcare, Education and Life Sciences, and Business Advisory segments. The Healthcare segment provides advisory services from strategy setting through implementation in the areas of organizational and resource alignment, clinical transformation, financial and operational performance, patient and caregiver engagement, and technology implementation and optimization to national and regional hospitals and integrated health systems, academic medical centers, community hospitals, and medical groups. The Education and Life Sciences segment offers consulting and technology solutions related to business and technology strategy, financial management, operational and organizational effectiveness, research administration, and regulatory compliance to higher education, academic medical center, pharmaceutical and medical device, biotechnology, and research industries. The Business Advisory segment provides enterprise performance management, enterprise resource planning, business intelligence and analytics, customer relationship management, and data management services; and capital advisory, transaction advisory, operational improvement, restructuring and turnaround, valuation, and dispute advisory services. The company serves healthcare, education, pharmaceutical and medical device, financial services, energy and utilities, retail, aerospace, automotive, technology, telecommunications, consumer products, governmental, metals and mining, engineering and construction, hospitality and gaming, logistics, and manufacturing industries. Huron Consulting Group Inc. was founded in 2002 and is headquartered in Chicago, Illinois.

FINANCIAL RATIOS  of  Huron Consulting Group (HURN)

Valuation Ratios
P/E Ratio 18.2
Price to Sales 0.9
Price to Book 1.1
Price to Tangible Book
Price to Cash Flow 5.4
Price to Free Cash Flow 6.1
Growth Rates
Sales Growth Rate 3.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -21.1%
Cap. Spend. - 3 Yr. Gr. Rate -7.4%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 45.1%
Total Debt to Equity 45.1%
Interest Coverage 11
Management Effectiveness
Return On Assets 3.6%
Ret/ On Assets - 3 Yr. Avg. 5.8%
Return On Total Capital 4%
Ret/ On T. Cap. - 3 Yr. Avg. 6.6%
Return On Equity 5.8%
Return On Equity - 3 Yr. Avg. 9.7%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 34.3%
Gross Margin - 3 Yr. Avg. 34.9%
EBITDA Margin 14%
EBITDA Margin - 3 Yr. Avg. 16.7%
Operating Margin 9.3%
Oper. Margin - 3 Yr. Avg. 11.8%
Pre-Tax Margin 7.4%
Pre-Tax Margin - 3 Yr. Avg. 9.9%
Net Profit Margin 4.8%
Net Profit Margin - 3 Yr. Avg. 7.9%
Effective Tax Rate 33.9%
Eff/ Tax Rate - 3 Yr. Avg. 33.8%
Payout Ratio 0%

HURN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HURN stock intrinsic value calculation we used $798 million for the last fiscal year's total revenue generated by Huron Consulting Group. The default revenue input number comes from 2016 income statement of Huron Consulting 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 HURN stock valuation model: a) initial revenue growth rate of 4.6% 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 5.3%, whose default value for HURN is calculated based on our internal credit rating of Huron Consulting 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 Huron Consulting 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 HURN stock the variable cost ratio is equal to 86.6%.

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 HURN 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 Huron Consulting Group.

Corporate tax rate of 27% is the nominal tax rate for Huron Consulting 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 HURN 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 HURN are equal to 13%.

Life of production assets of 18.7 years is the average useful life of capital assets used in Huron Consulting 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 HURN is equal to 3.4%. 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 - $648 million for Huron Consulting 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 20.546 million for Huron Consulting 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 Huron Consulting Group at the current share price and the inputted number of shares is $0.7 billion.

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COMPANY NEWS

▶ Huron Consulting reports 2Q loss   [Jul-28-17 12:18AM  Associated Press]
▶ District taps familiar partner to study United Medical Center replacement   [May-16-17 12:18PM  American City Business Journals]
▶ Huron Consulting beats Street 1Q forecasts   [May-01-17 07:08AM  Associated Press]
▶ Huron Closes Acquisition of Growth Strategy Firm Innosight   [Mar-01-17 04:15PM  Business Wire]
▶ Huron Consulting misses 4Q profit forecasts   [06:07PM  Associated Press]
▶ Huron Consulting Group Expands Oracle Cloud Capabilities   [Jun-15-16 04:05PM  Business Wire]
Stock chart of HURN Financial statements of HURN
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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