Intrinsic value of PRGX Global - PRGX

Previous Close

$6.25

  Intrinsic Value

$2.88

stock screener

  Rating & Target

str. sell

-54%

  Value-price divergence*

+330%

Previous close

$6.25

 
Intrinsic value

$2.88

 
Up/down potential

-54%

 
Rating

str. sell

 
Value-price divergence*

+330%

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

We calculate the intrinsic value of PRGX 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 0.1

 

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, %
  2.17
  9.70
  9.23
  8.81
  8.43
  8.08
  7.78
  7.50
  7.25
  7.02
  6.82
  6.64
  6.47
  6.33
  6.19
  6.08
  5.97
  5.87
  5.78
  5.71
  5.63
  5.57
  5.51
  5.46
  5.42
  5.37
  5.34
  5.30
  5.27
  5.25
  5.22
Revenue, $m
  141
  155
  169
  184
  199
  215
  232
  250
  268
  286
  306
  326
  347
  369
  392
  416
  441
  467
  494
  522
  552
  582
  614
  648
  683
  720
  758
  798
  840
  885
  931
Variable operating expenses, $m
 
  149
  163
  177
  192
  207
  223
  240
  257
  275
  294
  312
  332
  353
  375
  397
  421
  446
  472
  499
  527
  556
  587
  619
  652
  687
  724
  762
  803
  845
  889
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
  138
  149
  163
  177
  192
  207
  223
  240
  257
  275
  294
  312
  332
  353
  375
  397
  421
  446
  472
  499
  527
  556
  587
  619
  652
  687
  724
  762
  803
  845
  889
Operating income, $m
  3
  6
  6
  7
  8
  8
  9
  10
  11
  11
  12
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  28
  29
  31
  32
  34
  36
  38
  40
  42
EBITDA, $m
  10
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  20
  21
  22
  23
  25
  26
  28
  30
  31
  33
  35
  37
  39
  41
  43
  45
  48
  50
  53
  56
Interest expense (income), $m
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
Earnings before tax, $m
  3
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  27
  29
  30
  32
  33
  35
Tax expense, $m
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
Net income, $m
  1
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  16
  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
  93
  84
  92
  100
  109
  118
  127
  136
  146
  156
  167
  178
  190
  202
  214
  227
  241
  255
  270
  285
  301
  318
  336
  354
  373
  393
  414
  436
  459
  483
  508
Adjusted assets (=assets-cash), $m
  77
  84
  92
  100
  109
  118
  127
  136
  146
  156
  167
  178
  190
  202
  214
  227
  241
  255
  270
  285
  301
  318
  336
  354
  373
  393
  414
  436
  459
  483
  508
Revenue / Adjusted assets
  1.831
  1.845
  1.837
  1.840
  1.826
  1.822
  1.827
  1.838
  1.836
  1.833
  1.832
  1.831
  1.826
  1.827
  1.832
  1.833
  1.830
  1.831
  1.830
  1.832
  1.834
  1.830
  1.827
  1.831
  1.831
  1.832
  1.831
  1.830
  1.830
  1.832
  1.833
Average production assets, $m
  21
  23
  25
  27
  30
  32
  35
  37
  40
  43
  46
  49
  52
  55
  58
  62
  66
  70
  74
  78
  82
  87
  92
  97
  102
  107
  113
  119
  125
  132
  139
Working capital, $m
  17
  5
  6
  6
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  14
  15
  15
  16
  17
  18
  19
  20
  22
  23
  24
  25
  27
  28
  29
  31
  33
Total debt, $m
  4
  4
  7
  11
  15
  20
  24
  29
  33
  38
  43
  49
  54
  60
  66
  72
  79
  86
  93
  100
  108
  116
  124
  133
  142
  152
  162
  173
  184
  195
  207
Total liabilities, $m
  41
  41
  44
  48
  52
  57
  61
  66
  70
  75
  80
  86
  91
  97
  103
  109
  116
  123
  130
  137
  145
  153
  161
  170
  179
  189
  199
  210
  221
  232
  244
Total equity, $m
  52
  44
  48
  52
  56
  61
  66
  71
  76
  81
  87
  93
  98
  105
  111
  118
  125
  132
  140
  148
  156
  165
  174
  184
  194
  204
  215
  226
  238
  251
  264
Total liabilities and equity, $m
  93
  85
  92
  100
  108
  118
  127
  137
  146
  156
  167
  179
  189
  202
  214
  227
  241
  255
  270
  285
  301
  318
  335
  354
  373
  393
  414
  436
  459
  483
  508
Debt-to-equity ratio
  0.077
  0.080
  0.150
  0.220
  0.270
  0.320
  0.360
  0.400
  0.440
  0.470
  0.500
  0.530
  0.550
  0.570
  0.590
  0.610
  0.630
  0.650
  0.660
  0.680
  0.690
  0.700
  0.710
  0.730
  0.740
  0.750
  0.750
  0.760
  0.770
  0.780
  0.790
Adjusted equity ratio
  0.468
  0.519
  0.519
  0.519
  0.519
  0.519
  0.519
  0.519
  0.519
  0.519
  0.519
  0.519
  0.519
  0.519
  0.519
  0.519
  0.519
  0.519
  0.519
  0.519
  0.519
  0.519
  0.519
  0.519
  0.519
  0.519
  0.519
  0.519
  0.519
  0.519
  0.519

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
Depreciation, amort., depletion, $m
  7
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
Funds from operations, $m
  8
  8
  8
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  26
  28
  29
  31
  32
  34
  36
  37
  39
Change in working capital, $m
  -2
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
Cash from operations, $m
  10
  7
  8
  8
  9
  10
  10
  11
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  20
  22
  23
  24
  25
  27
  28
  29
  31
  33
  34
  36
  38
Maintenance CAPEX, $m
  0
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
New CAPEX, $m
  -6
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
Cash from investing activities, $m
  -10
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -10
  -10
  -11
  -11
  -11
  -12
  -13
  -14
  -14
  -15
  -15
  -17
  -17
  -18
  -20
  -20
Free cash flow, $m
  0
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
Issuance/(repayment) of debt, $m
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
Issuance/(repurchase) of shares, $m
  -3
  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  
  0
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
Total cash flow (excl. dividends), $m
  1
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  11
  12
  13
  13
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
  28
  30
Retained Cash Flow (-), $m
  0
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
Prev. year cash balance distribution, $m
 
  12
  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
 
  15
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  17
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
 
  14
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  2
  2
  2
  2
  2
  2
  1
  1
  1
  1
  1
  1
  1
  0
  0
  0
  0
  0
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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PRGX Global, Inc., together with its subsidiaries, provides recovery audit services to businesses and government agencies having payment transactions and procurement environments. The company operates through three segments: Recovery Audit Services – Americas, Recovery Audit Services - Europe/Asia-Pacific, and Adjacent Services. The company’s recovery audit services are based on the mining of clients’ purchasing data for overpayments to the third-party suppliers. It also offers adjacent recovery services comprising data transformation, data analytics, and associated advisory services. The company serves retailers, such as discount, department, specialty, grocery, and drug stores, as well as wholesalers; business enterprises, including manufacturers, financial services firms, and pharmaceutical companies; and federal and state government agencies. PRGX Global, Inc. was founded in 1990 and is headquartered in Atlanta, Georgia.

FINANCIAL RATIOS  of  PRGX Global (PRGX)

Valuation Ratios
P/E Ratio 136.6
Price to Sales 1
Price to Book 2.6
Price to Tangible Book
Price to Cash Flow 13.7
Price to Free Cash Flow 34.1
Growth Rates
Sales Growth Rate 2.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 50%
Cap. Spend. - 3 Yr. Gr. Rate -3%
Financial Strength
Quick Ratio 4
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 7.7%
Interest Coverage 0
Management Effectiveness
Return On Assets 1.2%
Ret/ On Assets - 3 Yr. Avg. -3%
Return On Total Capital 1.9%
Ret/ On T. Cap. - 3 Yr. Avg. -4.2%
Return On Equity 1.9%
Return On Equity - 3 Yr. Avg. -4.2%
Asset Turnover 1.6
Profitability Ratios
Gross Margin 35.5%
Gross Margin - 3 Yr. Avg. 33.2%
EBITDA Margin 7.1%
EBITDA Margin - 3 Yr. Avg. 7%
Operating Margin 2.1%
Oper. Margin - 3 Yr. Avg. 2.5%
Pre-Tax Margin 2.1%
Pre-Tax Margin - 3 Yr. Avg. 1.4%
Net Profit Margin 0.7%
Net Profit Margin - 3 Yr. Avg. -2.1%
Effective Tax Rate 33.3%
Eff/ Tax Rate - 3 Yr. Avg. 144.4%
Payout Ratio 0%

PRGX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PRGX stock intrinsic value calculation we used $141 million for the last fiscal year's total revenue generated by PRGX Global. The default revenue input number comes from 2016 income statement of PRGX Global. 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 PRGX stock valuation model: a) initial revenue growth rate of 9.7% 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 PRGX is calculated based on our internal credit rating of PRGX Global, 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 PRGX Global.
    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 PRGX stock the variable cost ratio is equal to 96.5%.

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 PRGX 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 PRGX Global.

Corporate tax rate of 27% is the nominal tax rate for PRGX Global. 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 PRGX 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 PRGX are equal to 14.9%.

Life of production assets of 10 years is the average useful life of capital assets used in PRGX Global 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 PRGX is equal to 3.5%. 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 - $52 million for PRGX Global - 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 23.496 million for PRGX Global 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 PRGX Global at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ PRGX Global reports 2Q loss   [Aug-01-17 10:38PM  Associated Press]
▶ ETFs with exposure to PRGX Global, Inc. : May 16, 2017   [May-16-17 12:58PM  Capital Cube]
▶ ETFs with exposure to PRGX Global, Inc. : April 11, 2017   [Apr-11-17 02:23PM  Capital Cube]
▶ PRGX Global reports 4Q loss   [08:19AM  Associated Press]
▶ PRGX Global Launches PRGX OPTIX   [08:00AM  GlobeNewswire]
▶ PRGX Completes Acquisition of Cost & Compliance Associates   [Feb-23-17 04:15PM  GlobeNewswire]
▶ [$$] Northern Right Shakes Up Small Companies   [Dec-24-16 12:01AM  at Barrons.com]
▶ Does PRGX Global Inc (PRGX) Stack Up Against Its Peers?   [Dec-16-16 08:54PM  at Insider Monkey]
▶ [$$] Northern Right Capital Sees Promise in PRGX   [Nov-26-16 12:13AM  at Barrons.com]
▶ PRGX Global Completes Acquisition of Lavante   [Nov-01-16 08:00AM  GlobeNewswire]
▶ PRGX Introduces Two New Technology Platforms   [May-23-16 03:00PM  GlobeNewswire]
▶ PRGX Global reports 1Q loss   [09:19AM  AP]
Stock chart of PRGX Financial statements of PRGX
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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