Intrinsic value of Navigant Consulting - NCI

Previous Close

$15.83

  Intrinsic Value

$33.78

stock screener

  Rating & Target

str. buy

+113%

  Value-price divergence*

+5000%

Previous close

$15.83

 
Intrinsic value

$33.78

 
Up/down potential

+113%

 
Rating

str. buy

 
Value-price divergence*

+5000%

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

We calculate the intrinsic value of NCI 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, %
  12.51
  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
  1,034
  1,055
  1,079
  1,107
  1,138
  1,172
  1,210
  1,251
  1,296
  1,344
  1,396
  1,451
  1,510
  1,572
  1,639
  1,710
  1,785
  1,864
  1,948
  2,036
  2,130
  2,229
  2,333
  2,443
  2,558
  2,680
  2,808
  2,943
  3,085
  3,235
  3,392
Variable operating expenses, $m
 
  947
  967
  991
  1,017
  1,046
  1,077
  1,112
  1,149
  1,190
  1,233
  1,217
  1,266
  1,319
  1,374
  1,434
  1,496
  1,563
  1,633
  1,708
  1,786
  1,869
  1,956
  2,048
  2,145
  2,247
  2,355
  2,468
  2,587
  2,712
  2,844
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
  938
  947
  967
  991
  1,017
  1,046
  1,077
  1,112
  1,149
  1,190
  1,233
  1,217
  1,266
  1,319
  1,374
  1,434
  1,496
  1,563
  1,633
  1,708
  1,786
  1,869
  1,956
  2,048
  2,145
  2,247
  2,355
  2,468
  2,587
  2,712
  2,844
Operating income, $m
  97
  108
  112
  116
  121
  127
  133
  140
  147
  154
  163
  234
  244
  254
  265
  276
  288
  301
  314
  329
  344
  360
  377
  394
  413
  433
  453
  475
  498
  522
  548
EBITDA, $m
  137
  177
  181
  185
  191
  196
  203
  210
  217
  225
  234
  243
  253
  263
  274
  286
  299
  312
  326
  341
  357
  373
  391
  409
  428
  449
  470
  493
  517
  542
  568
Interest expense (income), $m
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  9
  10
  11
  11
  12
  13
  14
  15
  17
  18
  19
  20
  22
  23
  25
  26
  28
  30
  32
  34
  36
Earnings before tax, $m
  93
  103
  107
  111
  115
  121
  126
  132
  139
  146
  154
  224
  233
  242
  252
  263
  274
  286
  298
  311
  325
  339
  355
  371
  388
  406
  425
  445
  466
  488
  512
Tax expense, $m
  35
  28
  29
  30
  31
  33
  34
  36
  38
  39
  41
  61
  63
  65
  68
  71
  74
  77
  80
  84
  88
  92
  96
  100
  105
  110
  115
  120
  126
  132
  138
Net income, $m
  58
  75
  78
  81
  84
  88
  92
  97
  101
  107
  112
  164
  170
  177
  184
  192
  200
  208
  217
  227
  237
  248
  259
  271
  283
  297
  310
  325
  340
  356
  373

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  8
  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
  1,055
  1,067
  1,092
  1,120
  1,152
  1,187
  1,225
  1,267
  1,312
  1,360
  1,413
  1,468
  1,528
  1,591
  1,659
  1,730
  1,806
  1,887
  1,971
  2,061
  2,156
  2,256
  2,361
  2,472
  2,589
  2,713
  2,842
  2,979
  3,123
  3,274
  3,433
Adjusted assets (=assets-cash), $m
  1,047
  1,067
  1,092
  1,120
  1,152
  1,187
  1,225
  1,267
  1,312
  1,360
  1,413
  1,468
  1,528
  1,591
  1,659
  1,730
  1,806
  1,887
  1,971
  2,061
  2,156
  2,256
  2,361
  2,472
  2,589
  2,713
  2,842
  2,979
  3,123
  3,274
  3,433
Revenue / Adjusted assets
  0.988
  0.989
  0.988
  0.988
  0.988
  0.987
  0.988
  0.987
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
Average production assets, $m
  115
  117
  120
  123
  126
  130
  134
  139
  144
  149
  155
  161
  168
  175
  182
  190
  198
  207
  216
  226
  236
  247
  259
  271
  284
  297
  312
  327
  342
  359
  376
Working capital, $m
  125
  119
  122
  125
  129
  132
  137
  141
  146
  152
  158
  164
  171
  178
  185
  193
  202
  211
  220
  230
  241
  252
  264
  276
  289
  303
  317
  333
  349
  366
  383
Total debt, $m
  135
  143
  153
  164
  177
  191
  206
  223
  241
  261
  282
  304
  328
  354
  381
  410
  440
  472
  507
  543
  581
  621
  663
  708
  755
  804
  857
  912
  969
  1,030
  1,094
Total liabilities, $m
  420
  429
  439
  450
  463
  477
  492
  509
  527
  547
  568
  590
  614
  640
  667
  696
  726
  758
  793
  829
  867
  907
  949
  994
  1,041
  1,090
  1,143
  1,198
  1,255
  1,316
  1,380
Total equity, $m
  634
  638
  653
  670
  689
  710
  732
  757
  784
  813
  845
  878
  914
  952
  992
  1,035
  1,080
  1,128
  1,179
  1,233
  1,289
  1,349
  1,412
  1,478
  1,548
  1,622
  1,700
  1,781
  1,867
  1,958
  2,053
Total liabilities and equity, $m
  1,054
  1,067
  1,092
  1,120
  1,152
  1,187
  1,224
  1,266
  1,311
  1,360
  1,413
  1,468
  1,528
  1,592
  1,659
  1,731
  1,806
  1,886
  1,972
  2,062
  2,156
  2,256
  2,361
  2,472
  2,589
  2,712
  2,843
  2,979
  3,122
  3,274
  3,433
Debt-to-equity ratio
  0.213
  0.220
  0.230
  0.250
  0.260
  0.270
  0.280
  0.290
  0.310
  0.320
  0.330
  0.350
  0.360
  0.370
  0.380
  0.400
  0.410
  0.420
  0.430
  0.440
  0.450
  0.460
  0.470
  0.480
  0.490
  0.500
  0.500
  0.510
  0.520
  0.530
  0.530
Adjusted equity ratio
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  58
  75
  78
  81
  84
  88
  92
  97
  101
  107
  112
  164
  170
  177
  184
  192
  200
  208
  217
  227
  237
  248
  259
  271
  283
  297
  310
  325
  340
  356
  373
Depreciation, amort., depletion, $m
  40
  69
  69
  69
  69
  70
  70
  70
  70
  71
  71
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  19
  20
Funds from operations, $m
  102
  144
  147
  150
  154
  158
  162
  167
  172
  177
  183
  172
  179
  186
  194
  202
  211
  220
  229
  239
  250
  261
  273
  286
  299
  313
  327
  343
  359
  376
  394
Change in working capital, $m
  -8
  2
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
Cash from operations, $m
  110
  142
  144
  147
  150
  154
  158
  162
  167
  172
  177
  166
  173
  179
  186
  194
  202
  211
  220
  229
  239
  250
  261
  273
  286
  299
  313
  327
  343
  359
  376
Maintenance CAPEX, $m
  0
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -19
New CAPEX, $m
  -29
  -3
  -3
  -3
  -3
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -17
Cash from investing activities, $m
  -52
  -9
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -14
  -16
  -16
  -16
  -18
  -18
  -20
  -20
  -22
  -22
  -24
  -25
  -26
  -28
  -29
  -30
  -32
  -34
  -36
  -36
Free cash flow, $m
  58
  133
  135
  137
  140
  143
  146
  150
  154
  159
  163
  152
  157
  163
  170
  176
  184
  191
  199
  208
  217
  226
  236
  247
  258
  270
  282
  296
  309
  324
  339
Issuance/(repayment) of debt, $m
  -34
  8
  10
  11
  13
  14
  15
  17
  18
  20
  21
  22
  24
  26
  27
  29
  30
  32
  34
  36
  38
  40
  42
  45
  47
  50
  52
  55
  58
  61
  64
Issuance/(repurchase) of shares, $m
  -21
  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  
  -59
  8
  10
  11
  13
  14
  15
  17
  18
  20
  21
  22
  24
  26
  27
  29
  30
  32
  34
  36
  38
  40
  42
  45
  47
  50
  52
  55
  58
  61
  64
Total cash flow (excl. dividends), $m
  -1
  141
  145
  149
  153
  157
  162
  167
  172
  178
  184
  174
  181
  189
  197
  205
  214
  223
  233
  244
  255
  266
  279
  292
  305
  320
  335
  350
  367
  385
  403
Retained Cash Flow (-), $m
  -40
  -12
  -15
  -17
  -19
  -21
  -23
  -25
  -27
  -29
  -31
  -33
  -36
  -38
  -40
  -43
  -45
  -48
  -51
  -54
  -57
  -60
  -63
  -66
  -70
  -74
  -78
  -82
  -86
  -90
  -95
Prev. year cash balance distribution, $m
 
  8
  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
 
  137
  130
  132
  134
  136
  139
  142
  145
  149
  153
  141
  146
  151
  156
  162
  169
  175
  183
  190
  198
  207
  216
  225
  235
  246
  257
  269
  281
  294
  308
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
 
  131
  119
  115
  110
  106
  101
  96
  91
  86
  80
  67
  62
  57
  53
  48
  43
  38
  34
  29
  25
  21
  18
  15
  12
  10
  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
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Navigant Consulting, Inc. is a global professional services company. The Company serves clients in the healthcare, energy and financial services industries. It operates through four segments. The Healthcare segment provides consulting services and business process management services. The Energy segment provides advisory solutions in business strategy and planning, distributed energy resources and renewables, energy efficiency and demand response and grid modernization The Financial Services Advisory and Compliance segment provides strategic, operational, valuation, risk management, investigative and compliance advisory services to clients primarily in the financial services industry. The Disputes, Forensics & Legal Technology segment offers professional services, including valuation and economic analysis, as well as accounting, regulatory, construction and computer forensic expertise.

FINANCIAL RATIOS  of  Navigant Consulting (NCI)

Valuation Ratios
P/E Ratio 12.8
Price to Sales 0.7
Price to Book 1.2
Price to Tangible Book
Price to Cash Flow 6.8
Price to Free Cash Flow 9.2
Growth Rates
Sales Growth Rate 12.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -27.5%
Cap. Spend. - 3 Yr. Gr. Rate 10%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 21.3%
Total Debt to Equity 21.3%
Interest Coverage 24
Management Effectiveness
Return On Assets 5.8%
Ret/ On Assets - 3 Yr. Avg. 2.9%
Return On Total Capital 7.5%
Ret/ On T. Cap. - 3 Yr. Avg. 3.5%
Return On Equity 9.4%
Return On Equity - 3 Yr. Avg. 4.6%
Asset Turnover 1
Profitability Ratios
Gross Margin 29.7%
Gross Margin - 3 Yr. Avg. 29%
EBITDA Margin 13.2%
EBITDA Margin - 3 Yr. Avg. 8.6%
Operating Margin 9.3%
Oper. Margin - 3 Yr. Avg. 5.2%
Pre-Tax Margin 9%
Pre-Tax Margin - 3 Yr. Avg. 4.7%
Net Profit Margin 5.6%
Net Profit Margin - 3 Yr. Avg. 2.7%
Effective Tax Rate 37.6%
Eff/ Tax Rate - 3 Yr. Avg. 24%
Payout Ratio 0%

NCI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NCI stock intrinsic value calculation we used $1034 million for the last fiscal year's total revenue generated by Navigant Consulting. The default revenue input number comes from 2016 income statement of Navigant 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 NCI 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 4.3%, whose default value for NCI is calculated based on our internal credit rating of Navigant 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 Navigant 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 NCI stock the variable cost ratio is equal to 89.9%.

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 NCI 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 Navigant Consulting.

Corporate tax rate of 27% is the nominal tax rate for Navigant 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 NCI 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 NCI are equal to 11.1%.

Life of production assets of 18.5 years is the average useful life of capital assets used in Navigant 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 NCI is equal to 11.3%. 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 - $634 million for Navigant 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 47.177 million for Navigant 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 Navigant Consulting at the current share price and the inputted number of shares is $0.7 billion.

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COMPANY NEWS

▶ Navigant misses Street 2Q forecasts   [Jul-31-17 10:06PM  Associated Press]
▶ Why Navigant Consulting Stock Sank 10% Today   [May-03-17 04:35PM  Motley Fool]
▶ Navigant beats 1Q profit forecasts   [07:26AM  Associated Press]
▶ [$$] New questions for Goldman-backed oil venture   [Apr-23-17 07:14AM  Financial Times]
▶ NCI seeks to recover $19M from alleged embezzler, CEO says in earnings call   [Apr-10-17 01:55PM  American City Business Journals]
▶ James Mapes to Lead Navigant Cymetrix   [Mar-08-17 08:30AM  Business Wire]
▶ Navigant Announces Managing Director Promotions   [Dec-21-16 09:30AM  Business Wire]
▶ With Self-Driving Cars, We're All Cartographers   [Dec-19-16 01:13PM  at Forbes]
▶ Is Navigant Consulting, Inc. (NCI) Worthy of Your Portfolio?   [Dec-15-16 09:56AM  at Insider Monkey]
▶ US Wind Generation Sets New Records Throughout 2016   [Dec-08-16 04:55PM  at Forbes]
Financial statements of NCI
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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