Intrinsic value of Booz Allen Hamilton Holding Corporation - BAH

Previous Close

$61.25

  Intrinsic Value

$56.15

stock screener

  Rating & Target

hold

-8%

Previous close

$61.25

 
Intrinsic value

$56.15

 
Up/down potential

-8%

 
Rating

hold

We calculate the intrinsic value of BAH 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 0001), $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 8.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  13.10
  12.29
  11.56
  10.90
  10.31
  9.78
  9.30
  8.87
  8.49
  8.14
  7.82
  7.54
  7.29
  7.06
  6.85
  6.67
  6.50
  6.35
  6.22
  6.09
  5.98
  5.89
  5.80
  5.72
  5.65
  5.58
  5.52
  5.47
  5.42
  5.38
Revenue, $m
  6,981
  7,838
  8,745
  9,698
  10,699
  11,745
  12,838
  13,977
  15,164
  16,398
  17,681
  19,014
  20,400
  21,840
  23,336
  24,892
  26,511
  28,194
  29,947
  31,772
  33,673
  35,655
  37,722
  39,879
  42,131
  44,483
  46,940
  49,508
  52,193
  55,002
Variable operating expenses, $m
  6,272
  7,020
  7,810
  8,642
  9,514
  10,426
  11,379
  12,372
  13,407
  14,482
  15,415
  16,578
  17,786
  19,041
  20,346
  21,703
  23,114
  24,582
  26,109
  27,701
  29,358
  31,087
  32,889
  34,769
  36,733
  38,783
  40,925
  43,164
  45,505
  47,954
Fixed operating expenses, $m
  88
  90
  92
  94
  96
  98
  100
  102
  105
  107
  109
  112
  114
  117
  119
  122
  124
  127
  130
  133
  136
  139
  142
  145
  148
  151
  155
  158
  162
  165
Total operating expenses, $m
  6,360
  7,110
  7,902
  8,736
  9,610
  10,524
  11,479
  12,474
  13,512
  14,589
  15,524
  16,690
  17,900
  19,158
  20,465
  21,825
  23,238
  24,709
  26,239
  27,834
  29,494
  31,226
  33,031
  34,914
  36,881
  38,934
  41,080
  43,322
  45,667
  48,119
Operating income, $m
  621
  729
  843
  963
  1,089
  1,221
  1,359
  1,503
  1,652
  1,808
  2,156
  2,325
  2,500
  2,682
  2,871
  3,068
  3,272
  3,485
  3,707
  3,938
  4,179
  4,430
  4,692
  4,965
  5,250
  5,548
  5,860
  6,186
  6,526
  6,882
EBITDA, $m
  847
  960
  1,079
  1,205
  1,337
  1,475
  1,619
  1,770
  1,926
  2,089
  2,259
  2,435
  2,618
  2,808
  3,006
  3,212
  3,426
  3,649
  3,881
  4,122
  4,374
  4,637
  4,911
  5,196
  5,495
  5,806
  6,132
  6,473
  6,829
  7,201
Interest expense (income), $m
  49
  98
  120
  143
  167
  192
  219
  247
  276
  306
  338
  371
  405
  440
  477
  516
  555
  597
  640
  685
  732
  780
  831
  884
  939
  996
  1,056
  1,119
  1,184
  1,253
  1,324
Earnings before tax, $m
  522
  609
  700
  796
  897
  1,002
  1,112
  1,227
  1,346
  1,470
  1,786
  1,920
  2,060
  2,205
  2,355
  2,512
  2,676
  2,845
  3,022
  3,207
  3,399
  3,599
  3,808
  4,026
  4,254
  4,492
  4,741
  5,001
  5,274
  5,558
Tax expense, $m
  141
  164
  189
  215
  242
  271
  300
  331
  363
  397
  482
  518
  556
  595
  636
  678
  722
  768
  816
  866
  918
  972
  1,028
  1,087
  1,149
  1,213
  1,280
  1,350
  1,424
  1,501
Net income, $m
  381
  444
  511
  581
  655
  732
  812
  896
  983
  1,073
  1,304
  1,402
  1,503
  1,609
  1,719
  1,834
  1,953
  2,077
  2,206
  2,341
  2,481
  2,627
  2,780
  2,939
  3,106
  3,279
  3,461
  3,651
  3,850
  4,058

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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 assets, $m
  4,080
  4,581
  5,111
  5,668
  6,253
  6,865
  7,503
  8,169
  8,862
  9,584
  10,333
  11,113
  11,923
  12,764
  13,639
  14,548
  15,494
  16,478
  17,502
  18,569
  19,680
  20,839
  22,047
  23,308
  24,624
  25,998
  27,434
  28,935
  30,504
  32,146
Adjusted assets (=assets-cash), $m
  4,080
  4,581
  5,111
  5,668
  6,253
  6,865
  7,503
  8,169
  8,862
  9,584
  10,333
  11,113
  11,923
  12,764
  13,639
  14,548
  15,494
  16,478
  17,502
  18,569
  19,680
  20,839
  22,047
  23,308
  24,624
  25,998
  27,434
  28,935
  30,504
  32,146
Revenue / Adjusted assets
  1.711
  1.711
  1.711
  1.711
  1.711
  1.711
  1.711
  1.711
  1.711
  1.711
  1.711
  1.711
  1.711
  1.711
  1.711
  1.711
  1.711
  1.711
  1.711
  1.711
  1.711
  1.711
  1.711
  1.711
  1.711
  1.711
  1.711
  1.711
  1.711
  1.711
Average production assets, $m
  1,215
  1,364
  1,522
  1,687
  1,862
  2,044
  2,234
  2,432
  2,638
  2,853
  3,076
  3,308
  3,550
  3,800
  4,061
  4,331
  4,613
  4,906
  5,211
  5,528
  5,859
  6,204
  6,564
  6,939
  7,331
  7,740
  8,167
  8,614
  9,082
  9,570
Working capital, $m
  272
  306
  341
  378
  417
  458
  501
  545
  591
  640
  690
  742
  796
  852
  910
  971
  1,034
  1,100
  1,168
  1,239
  1,313
  1,391
  1,471
  1,555
  1,643
  1,735
  1,831
  1,931
  2,036
  2,145
Total debt, $m
  2,218
  2,641
  3,088
  3,558
  4,052
  4,568
  5,107
  5,669
  6,254
  6,863
  7,496
  8,154
  8,837
  9,547
  10,286
  11,053
  11,852
  12,682
  13,547
  14,447
  15,385
  16,362
  17,382
  18,446
  19,557
  20,717
  21,929
  23,195
  24,520
  25,906
Total liabilities, $m
  3,443
  3,867
  4,314
  4,784
  5,277
  5,794
  6,333
  6,895
  7,480
  8,089
  8,721
  9,379
  10,063
  10,773
  11,511
  12,279
  13,077
  13,908
  14,772
  15,672
  16,610
  17,588
  18,608
  19,672
  20,782
  21,942
  23,154
  24,421
  25,746
  27,131
Total equity, $m
  636
  715
  797
  884
  975
  1,071
  1,171
  1,274
  1,383
  1,495
  1,612
  1,734
  1,860
  1,991
  2,128
  2,270
  2,417
  2,571
  2,730
  2,897
  3,070
  3,251
  3,439
  3,636
  3,841
  4,056
  4,280
  4,514
  4,759
  5,015
Total liabilities and equity, $m
  4,079
  4,582
  5,111
  5,668
  6,252
  6,865
  7,504
  8,169
  8,863
  9,584
  10,333
  11,113
  11,923
  12,764
  13,639
  14,549
  15,494
  16,479
  17,502
  18,569
  19,680
  20,839
  22,047
  23,308
  24,623
  25,998
  27,434
  28,935
  30,505
  32,146
Debt-to-equity ratio
  3.480
  3.700
  3.870
  4.020
  4.150
  4.270
  4.360
  4.450
  4.520
  4.590
  4.650
  4.700
  4.750
  4.790
  4.830
  4.870
  4.900
  4.930
  4.960
  4.990
  5.010
  5.030
  5.050
  5.070
  5.090
  5.110
  5.120
  5.140
  5.150
  5.170
Adjusted equity ratio
  0.156
  0.156
  0.156
  0.156
  0.156
  0.156
  0.156
  0.156
  0.156
  0.156
  0.156
  0.156
  0.156
  0.156
  0.156
  0.156
  0.156
  0.156
  0.156
  0.156
  0.156
  0.156
  0.156
  0.156
  0.156
  0.156
  0.156
  0.156
  0.156
  0.156

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  381
  444
  511
  581
  655
  732
  812
  896
  983
  1,073
  1,304
  1,402
  1,503
  1,609
  1,719
  1,834
  1,953
  2,077
  2,206
  2,341
  2,481
  2,627
  2,780
  2,939
  3,106
  3,279
  3,461
  3,651
  3,850
  4,058
Depreciation, amort., depletion, $m
  226
  231
  237
  242
  248
  254
  260
  267
  274
  281
  103
  110
  118
  127
  135
  144
  154
  164
  174
  184
  195
  207
  219
  231
  244
  258
  272
  287
  303
  319
Funds from operations, $m
  608
  676
  748
  823
  903
  986
  1,072
  1,163
  1,257
  1,355
  1,406
  1,512
  1,622
  1,736
  1,855
  1,978
  2,107
  2,241
  2,380
  2,525
  2,676
  2,834
  2,999
  3,171
  3,350
  3,537
  3,733
  3,938
  4,152
  4,377
Change in working capital, $m
  32
  33
  35
  37
  39
  41
  43
  44
  46
  48
  50
  52
  54
  56
  58
  61
  63
  66
  68
  71
  74
  77
  81
  84
  88
  92
  96
  100
  105
  110
Cash from operations, $m
  576
  642
  712
  786
  864
  945
  1,030
  1,118
  1,210
  1,306
  1,356
  1,460
  1,568
  1,680
  1,796
  1,918
  2,044
  2,175
  2,312
  2,454
  2,602
  2,757
  2,918
  3,086
  3,262
  3,446
  3,637
  3,838
  4,048
  4,267
Maintenance CAPEX, $m
  -36
  -40
  -45
  -51
  -56
  -62
  -68
  -74
  -81
  -88
  -95
  -103
  -110
  -118
  -127
  -135
  -144
  -154
  -164
  -174
  -184
  -195
  -207
  -219
  -231
  -244
  -258
  -272
  -287
  -303
New CAPEX, $m
  -143
  -149
  -158
  -166
  -174
  -182
  -190
  -198
  -206
  -215
  -223
  -232
  -241
  -251
  -260
  -271
  -282
  -293
  -305
  -318
  -331
  -345
  -360
  -375
  -392
  -409
  -428
  -447
  -467
  -489
Cash from investing activities, $m
  -179
  -189
  -203
  -217
  -230
  -244
  -258
  -272
  -287
  -303
  -318
  -335
  -351
  -369
  -387
  -406
  -426
  -447
  -469
  -492
  -515
  -540
  -567
  -594
  -623
  -653
  -686
  -719
  -754
  -792
Free cash flow, $m
  397
  453
  509
  570
  633
  701
  771
  846
  923
  1,004
  1,038
  1,125
  1,216
  1,311
  1,409
  1,512
  1,618
  1,728
  1,843
  1,963
  2,087
  2,217
  2,352
  2,492
  2,639
  2,792
  2,952
  3,119
  3,293
  3,476
Issuance/(repayment) of debt, $m
  399
  423
  447
  470
  493
  516
  539
  562
  585
  609
  633
  658
  684
  710
  738
  768
  798
  831
  864
  900
  938
  978
  1,020
  1,064
  1,111
  1,160
  1,212
  1,267
  1,325
  1,386
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  399
  423
  447
  470
  493
  516
  539
  562
  585
  609
  633
  658
  684
  710
  738
  768
  798
  831
  864
  900
  938
  978
  1,020
  1,064
  1,111
  1,160
  1,212
  1,267
  1,325
  1,386
Total cash flow (excl. dividends), $m
  797
  876
  956
  1,040
  1,127
  1,217
  1,311
  1,408
  1,508
  1,612
  1,671
  1,783
  1,900
  2,021
  2,148
  2,279
  2,416
  2,559
  2,708
  2,863
  3,025
  3,194
  3,371
  3,556
  3,750
  3,952
  4,164
  4,386
  4,618
  4,861
Retained Cash Flow (-), $m
  -74
  -78
  -83
  -87
  -91
  -95
  -100
  -104
  -108
  -113
  -117
  -122
  -126
  -131
  -136
  -142
  -148
  -154
  -160
  -166
  -173
  -181
  -188
  -197
  -205
  -214
  -224
  -234
  -245
  -256
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
  723
  798
  874
  953
  1,036
  1,122
  1,211
  1,304
  1,400
  1,500
  1,554
  1,661
  1,774
  1,890
  2,011
  2,137
  2,269
  2,405
  2,548
  2,697
  2,852
  3,014
  3,183
  3,360
  3,544
  3,738
  3,940
  4,152
  4,373
  4,605
Discount rate, %
  8.60
  9.03
  9.48
  9.96
  10.45
  10.98
  11.52
  12.10
  12.71
  13.34
  14.01
  14.71
  15.44
  16.22
  17.03
  17.88
  18.77
  19.71
  20.70
  21.73
  22.82
  23.96
  25.16
  26.42
  27.74
  29.12
  30.58
  32.11
  33.71
  35.40
PV of cash for distribution, $m
  665
  671
  666
  652
  630
  600
  564
  523
  477
  429
  367
  320
  274
  231
  190
  154
  122
  94
  71
  53
  38
  27
  18
  12
  8
  5
  3
  2
  1
  1
Current shareholders' claim on cash, %
  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

Booz Allen Hamilton Holding Corporation is a holding company. The Company is a provider of management and technology, consulting and engineering services to the United States and international governments, corporations and not-for-profit organizations. The Company's client base includes government, commercial and international clients. Its commercial clients in the United States are primarily in the financial services, healthcare and life sciences, energy, high-technology manufacturing, retail, and automotive industries. Its international clients are primarily in the Middle East, along with a presence in Southeast Asia. The Company's functional service offerings include Systems Delivery, Engineering and Science, Cyber, Analytics and Consulting. The Company's innovation service offerings are Digital, Cyber Futures, Next Generation Analytics and Directed Energy.

FINANCIAL RATIOS  of  Booz Allen Hamilton Holding Corporation (BAH)

Valuation Ratios
P/E Ratio 36.2
Price to Sales 1.6
Price to Book 15.9
Price to Tangible Book
Price to Cash Flow 23.9
Price to Free Cash Flow 27.8
Growth Rates
Sales Growth Rate 7.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -19.4%
Cap. Spend. - 3 Yr. Gr. Rate 20.8%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 256.1%
Total Debt to Equity 289.7%
Interest Coverage 9
Management Effectiveness
Return On Assets 8.8%
Ret/ On Assets - 3 Yr. Avg. 9.8%
Return On Total Capital 11.9%
Ret/ On T. Cap. - 3 Yr. Avg. 13.4%
Return On Equity 51.3%
Return On Equity - 3 Yr. Avg. 93.3%
Asset Turnover 1.8
Profitability Ratios
Gross Margin 53.6%
Gross Margin - 3 Yr. Avg. 52.2%
EBITDA Margin 9%
EBITDA Margin - 3 Yr. Avg. 9.2%
Operating Margin 8.3%
Oper. Margin - 3 Yr. Avg. 8.4%
Pre-Tax Margin 7.1%
Pre-Tax Margin - 3 Yr. Avg. 7.1%
Net Profit Margin 4.3%
Net Profit Margin - 3 Yr. Avg. 4.7%
Effective Tax Rate 38.8%
Eff/ Tax Rate - 3 Yr. Avg. 33.6%
Payout Ratio 36.9%

BAH stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BAH stock intrinsic value calculation we used $6172 million for the last fiscal year's total revenue generated by Booz Allen Hamilton Holding Corporation. The default revenue input number comes from 0001 income statement of Booz Allen Hamilton Holding Corporation. 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 BAH stock valuation model: a) initial revenue growth rate of 13.1% 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 8.6%, whose default value for BAH is calculated based on our internal credit rating of Booz Allen Hamilton Holding Corporation, 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 Booz Allen Hamilton Holding Corporation.
    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 BAH stock the variable cost ratio is equal to 90.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $86 million in the base year in the intrinsic value calculation for BAH 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 5.4% for Booz Allen Hamilton Holding Corporation.

Corporate tax rate of 27% is the nominal tax rate for Booz Allen Hamilton Holding Corporation. 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 BAH 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 BAH are equal to 17.4%.

Life of production assets of 30.8 years is the average useful life of capital assets used in Booz Allen Hamilton Holding Corporation 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 BAH is equal to 3.9%. 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 - $562.491 million for Booz Allen Hamilton Holding Corporation - 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 140.131 million for Booz Allen Hamilton Holding Corporation 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 Booz Allen Hamilton Holding Corporation at the current share price and the inputted number of shares is $8.6 billion.

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