Intrinsic value of CRA International,Inc. - CRAI

Previous Close

$39.54

  Intrinsic Value

$138.18

stock screener

  Rating & Target

str. buy

+249%

Previous close

$39.54

 
Intrinsic value

$138.18

 
Up/down potential

+249%

 
Rating

str. buy

We calculate the intrinsic value of CRAI 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 0.3

 

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, %
  12.10
  11.39
  10.75
  10.18
  9.66
  9.19
  8.77
  8.40
  8.06
  7.75
  7.48
  7.23
  7.01
  6.80
  6.62
  6.46
  6.32
  6.18
  6.07
  5.96
  5.86
  5.78
  5.70
  5.63
  5.57
  5.51
  5.46
  5.41
  5.37
  5.33
Revenue, $m
  469
  522
  578
  637
  698
  763
  830
  899
  972
  1,047
  1,125
  1,206
  1,291
  1,379
  1,470
  1,565
  1,664
  1,767
  1,874
  1,986
  2,102
  2,224
  2,350
  2,483
  2,621
  2,765
  2,916
  3,074
  3,239
  3,412
Variable operating expenses, $m
  336
  374
  413
  455
  498
  544
  591
  640
  691
  744
  795
  852
  912
  974
  1,039
  1,106
  1,176
  1,248
  1,324
  1,403
  1,485
  1,571
  1,661
  1,754
  1,852
  1,954
  2,060
  2,172
  2,289
  2,411
Fixed operating expenses, $m
  92
  94
  96
  98
  100
  103
  105
  107
  109
  112
  114
  117
  119
  122
  125
  127
  130
  133
  136
  139
  142
  145
  148
  152
  155
  158
  162
  166
  169
  173
Total operating expenses, $m
  428
  468
  509
  553
  598
  647
  696
  747
  800
  856
  909
  969
  1,031
  1,096
  1,164
  1,233
  1,306
  1,381
  1,460
  1,542
  1,627
  1,716
  1,809
  1,906
  2,007
  2,112
  2,222
  2,338
  2,458
  2,584
Operating income, $m
  41
  54
  69
  84
  100
  116
  134
  152
  171
  191
  216
  237
  259
  283
  307
  332
  358
  385
  414
  444
  475
  507
  541
  577
  614
  653
  694
  737
  781
  828
EBITDA, $m
  53
  67
  83
  99
  116
  133
  152
  171
  191
  212
  234
  256
  280
  304
  330
  357
  384
  413
  443
  475
  508
  542
  578
  616
  655
  697
  740
  785
  833
  882
Interest expense (income), $m
  0
  0
  1
  2
  4
  5
  6
  8
  9
  11
  12
  14
  16
  18
  20
  22
  24
  26
  28
  30
  33
  35
  38
  41
  44
  46
  50
  53
  56
  60
  64
Earnings before tax, $m
  41
  53
  66
  80
  95
  110
  126
  143
  160
  178
  202
  221
  242
  263
  285
  308
  332
  357
  384
  411
  440
  469
  501
  533
  568
  603
  641
  680
  722
  765
Tax expense, $m
  11
  14
  18
  22
  26
  30
  34
  39
  43
  48
  54
  60
  65
  71
  77
  83
  90
  96
  104
  111
  119
  127
  135
  144
  153
  163
  173
  184
  195
  207
Net income, $m
  30
  39
  49
  59
  69
  80
  92
  104
  117
  130
  147
  162
  176
  192
  208
  225
  243
  261
  280
  300
  321
  343
  365
  389
  414
  441
  468
  497
  527
  558

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
  416
  463
  513
  565
  620
  677
  736
  798
  862
  929
  998
  1,071
  1,146
  1,223
  1,305
  1,389
  1,477
  1,568
  1,663
  1,762
  1,865
  1,973
  2,086
  2,203
  2,326
  2,454
  2,588
  2,728
  2,874
  3,028
Adjusted assets (=assets-cash), $m
  416
  463
  513
  565
  620
  677
  736
  798
  862
  929
  998
  1,071
  1,146
  1,223
  1,305
  1,389
  1,477
  1,568
  1,663
  1,762
  1,865
  1,973
  2,086
  2,203
  2,326
  2,454
  2,588
  2,728
  2,874
  3,028
Revenue / Adjusted assets
  1.127
  1.127
  1.127
  1.127
  1.126
  1.127
  1.128
  1.127
  1.128
  1.127
  1.127
  1.126
  1.127
  1.128
  1.126
  1.127
  1.127
  1.127
  1.127
  1.127
  1.127
  1.127
  1.127
  1.127
  1.127
  1.127
  1.127
  1.127
  1.127
  1.127
Average production assets, $m
  106
  118
  131
  145
  159
  173
  188
  204
  221
  238
  255
  274
  293
  313
  334
  355
  378
  401
  425
  451
  477
  505
  534
  564
  595
  628
  662
  698
  735
  775
Working capital, $m
  -6
  -7
  -8
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -26
  -27
  -29
  -31
  -32
  -34
  -36
  -38
  -40
  -42
  -44
Total debt, $m
  21
  43
  67
  91
  117
  144
  172
  201
  231
  262
  295
  329
  364
  401
  439
  478
  520
  563
  607
  654
  702
  753
  806
  861
  919
  979
  1,042
  1,108
  1,177
  1,249
Total liabilities, $m
  195
  218
  241
  266
  291
  318
  346
  375
  405
  437
  469
  503
  538
  575
  613
  653
  694
  737
  782
  828
  877
  927
  980
  1,035
  1,093
  1,153
  1,216
  1,282
  1,351
  1,423
Total equity, $m
  220
  245
  272
  300
  328
  359
  390
  423
  457
  492
  529
  567
  607
  648
  691
  736
  783
  831
  881
  934
  989
  1,046
  1,105
  1,168
  1,233
  1,300
  1,371
  1,446
  1,523
  1,605
Total liabilities and equity, $m
  415
  463
  513
  566
  619
  677
  736
  798
  862
  929
  998
  1,070
  1,145
  1,223
  1,304
  1,389
  1,477
  1,568
  1,663
  1,762
  1,866
  1,973
  2,085
  2,203
  2,326
  2,453
  2,587
  2,728
  2,874
  3,028
Debt-to-equity ratio
  0.100
  0.180
  0.250
  0.300
  0.360
  0.400
  0.440
  0.470
  0.510
  0.530
  0.560
  0.580
  0.600
  0.620
  0.630
  0.650
  0.660
  0.680
  0.690
  0.700
  0.710
  0.720
  0.730
  0.740
  0.750
  0.750
  0.760
  0.770
  0.770
  0.780
Adjusted equity ratio
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  30
  39
  49
  59
  69
  80
  92
  104
  117
  130
  147
  162
  176
  192
  208
  225
  243
  261
  280
  300
  321
  343
  365
  389
  414
  441
  468
  497
  527
  558
Depreciation, amort., depletion, $m
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  18
  19
  20
  22
  23
  25
  26
  28
  30
  31
  33
  35
  37
  39
  41
  44
  46
  48
  51
  54
Funds from operations, $m
  42
  52
  62
  73
  85
  97
  110
  123
  137
  151
  165
  181
  197
  214
  231
  250
  269
  289
  310
  331
  354
  378
  403
  429
  456
  484
  514
  545
  578
  612
Change in working capital, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
Cash from operations, $m
  43
  53
  63
  74
  86
  98
  111
  124
  138
  152
  166
  182
  198
  215
  232
  251
  270
  290
  311
  333
  356
  379
  404
  430
  457
  486
  516
  547
  580
  614
Maintenance CAPEX, $m
  -7
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -17
  -18
  -19
  -20
  -22
  -23
  -25
  -26
  -28
  -30
  -31
  -33
  -35
  -37
  -39
  -41
  -44
  -46
  -48
  -51
New CAPEX, $m
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -30
  -31
  -33
  -34
  -36
  -37
  -39
Cash from investing activities, $m
  -18
  -19
  -21
  -22
  -24
  -26
  -27
  -29
  -30
  -32
  -35
  -36
  -38
  -40
  -43
  -45
  -47
  -49
  -52
  -55
  -57
  -61
  -64
  -67
  -70
  -74
  -78
  -82
  -85
  -90
Free cash flow, $m
  25
  33
  42
  52
  62
  72
  84
  95
  107
  120
  132
  145
  160
  175
  190
  206
  223
  240
  259
  278
  298
  319
  340
  363
  387
  412
  438
  465
  494
  524
Issuance/(repayment) of debt, $m
  21
  22
  23
  25
  26
  27
  28
  29
  30
  31
  33
  34
  35
  37
  38
  40
  41
  43
  45
  47
  49
  51
  53
  55
  58
  60
  63
  66
  69
  72
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  
  21
  22
  23
  25
  26
  27
  28
  29
  30
  31
  33
  34
  35
  37
  38
  40
  41
  43
  45
  47
  49
  51
  53
  55
  58
  60
  63
  66
  69
  72
Total cash flow (excl. dividends), $m
  46
  55
  66
  76
  88
  99
  111
  124
  137
  151
  164
  179
  195
  211
  228
  246
  264
  283
  303
  324
  346
  369
  393
  418
  445
  472
  501
  531
  563
  596
Retained Cash Flow (-), $m
  -24
  -25
  -26
  -28
  -29
  -30
  -31
  -33
  -34
  -35
  -37
  -38
  -40
  -41
  -43
  -45
  -46
  -48
  -50
  -53
  -55
  -57
  -60
  -62
  -65
  -68
  -71
  -74
  -78
  -81
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
  22
  30
  39
  49
  59
  69
  80
  91
  103
  116
  128
  141
  155
  170
  185
  201
  218
  235
  253
  272
  292
  312
  334
  356
  380
  404
  430
  457
  485
  515
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
  21
  28
  34
  40
  45
  50
  54
  57
  59
  61
  61
  60
  59
  57
  54
  51
  47
  43
  39
  35
  30
  26
  22
  18
  15
  12
  9
  7
  5
  4
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
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CRA International, Inc. is a global consulting firm. The Company provides economic, financial and management consulting services. The Company consulting services in two areas: litigation, regulatory, and financial consulting and management consulting. The Company provides services, such as economic capability, analyses and testimony in areas, such as Antitrust & Competition; Damages & Valuation; Financial Accounting & Valuation; Financial Economics; Forensic & Cyber Investigations; Insurance Economics; Intellectual Property; International Arbitration; Labor & Employment; Mergers & Acquisitions; Regulatory Economics & Compliance; Securities & Financial Markets, and Transfer Pricing. It offers management consulting in the areas, including Auctions & Competitive Bidding; Corporate & Business Strategy; Enterprise Risk Management; Environmental & Energy Strategy; Intellectual Property & Technology Management; Organization & Performance Improvement, and Transaction Advisory Services.

FINANCIAL RATIOS  of  CRA International,Inc. (CRAI)

Valuation Ratios
P/E Ratio 25.3
Price to Sales 1
Price to Book 1.6
Price to Tangible Book
Price to Cash Flow 6.9
Price to Free Cash Flow 9.4
Growth Rates
Sales Growth Rate 6.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -27.8%
Cap. Spend. - 3 Yr. Gr. Rate 34.1%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 4.1%
Ret/ On Assets - 3 Yr. Avg. 3.7%
Return On Total Capital 6.2%
Ret/ On T. Cap. - 3 Yr. Avg. 5.4%
Return On Equity 6.2%
Return On Equity - 3 Yr. Avg. 5.5%
Asset Turnover 1
Profitability Ratios
Gross Margin 29.8%
Gross Margin - 3 Yr. Avg. 31.4%
EBITDA Margin 9.2%
EBITDA Margin - 3 Yr. Avg. 8.3%
Operating Margin 7.1%
Oper. Margin - 3 Yr. Avg. 6.4%
Pre-Tax Margin 6.8%
Pre-Tax Margin - 3 Yr. Avg. 6.1%
Net Profit Margin 4%
Net Profit Margin - 3 Yr. Avg. 3.7%
Effective Tax Rate 36.4%
Eff/ Tax Rate - 3 Yr. Avg. 43.3%
Payout Ratio 7.7%

CRAI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CRAI stock intrinsic value calculation we used $418 million for the last fiscal year's total revenue generated by CRA International,Inc.. The default revenue input number comes from 0001 income statement of CRA International,Inc.. 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 CRAI stock valuation model: a) initial revenue growth rate of 12.1% 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 4.3%, whose default value for CRAI is calculated based on our internal credit rating of CRA International,Inc., 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 CRA International,Inc..
    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 CRAI stock the variable cost ratio is equal to 71.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $90 million in the base year in the intrinsic value calculation for CRAI 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 CRA International,Inc..

Corporate tax rate of 27% is the nominal tax rate for CRA International,Inc.. 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 CRAI 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 CRAI are equal to 22.7%.

Life of production assets of 14.4 years is the average useful life of capital assets used in CRA International,Inc. 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 CRAI is equal to -1.3%. 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 - $196.472 million for CRA International,Inc. - 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 8.050 million for CRA International,Inc. 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 CRA International,Inc. at the current share price and the inputted number of shares is $0.3 billion.

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