Intrinsic value of CRA International - CRAI

Previous Close

$53.95

  Intrinsic Value

$31.08

stock screener

  Rating & Target

sell

-42%

Previous close

$53.95

 
Intrinsic value

$31.08

 
Up/down potential

-42%

 
Rating

sell

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 2017), $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 0.4

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  14.00
  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
Revenue, $m
  422
  477
  536
  598
  663
  731
  803
  877
  955
  1,036
  1,121
  1,208
  1,299
  1,394
  1,493
  1,595
  1,701
  1,812
  1,927
  2,047
  2,171
  2,301
  2,437
  2,578
  2,725
  2,879
  3,040
  3,208
  3,383
  3,567
Variable operating expenses, $m
  396
  447
  501
  558
  617
  680
  745
  814
  885
  960
  1,027
  1,107
  1,191
  1,278
  1,368
  1,462
  1,559
  1,661
  1,766
  1,876
  1,990
  2,109
  2,233
  2,363
  2,498
  2,639
  2,786
  2,940
  3,101
  3,269
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
  396
  447
  501
  558
  617
  680
  745
  814
  885
  960
  1,027
  1,107
  1,191
  1,278
  1,368
  1,462
  1,559
  1,661
  1,766
  1,876
  1,990
  2,109
  2,233
  2,363
  2,498
  2,639
  2,786
  2,940
  3,101
  3,269
Operating income, $m
  25
  30
  35
  40
  46
  51
  57
  63
  70
  77
  94
  101
  108
  116
  125
  133
  142
  151
  161
  171
  181
  192
  203
  215
  228
  240
  254
  268
  282
  298
EBITDA, $m
  50
  56
  63
  71
  78
  86
  95
  104
  113
  122
  132
  143
  154
  165
  176
  188
  201
  214
  228
  242
  257
  272
  288
  305
  322
  340
  359
  379
  400
  422
Interest expense (income), $m
  0
  0
  1
  2
  4
  5
  7
  8
  10
  11
  13
  15
  17
  19
  21
  23
  25
  28
  30
  32
  35
  38
  41
  44
  47
  50
  53
  57
  60
  64
  68
Earnings before tax, $m
  25
  29
  33
  36
  40
  45
  49
  54
  59
  64
  79
  84
  90
  95
  102
  108
  114
  121
  128
  136
  144
  152
  160
  169
  178
  187
  197
  208
  219
  230
Tax expense, $m
  7
  8
  9
  10
  11
  12
  13
  15
  16
  17
  21
  23
  24
  26
  27
  29
  31
  33
  35
  37
  39
  41
  43
  46
  48
  51
  53
  56
  59
  62
Net income, $m
  19
  21
  24
  27
  30
  33
  36
  39
  43
  46
  57
  61
  65
  70
  74
  79
  84
  89
  94
  99
  105
  111
  117
  123
  130
  137
  144
  152
  160
  168

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
  412
  466
  524
  584
  648
  715
  785
  858
  934
  1,013
  1,095
  1,181
  1,270
  1,363
  1,459
  1,559
  1,663
  1,771
  1,883
  2,001
  2,122
  2,250
  2,382
  2,520
  2,664
  2,815
  2,972
  3,136
  3,307
  3,487
Adjusted assets (=assets-cash), $m
  412
  466
  524
  584
  648
  715
  785
  858
  934
  1,013
  1,095
  1,181
  1,270
  1,363
  1,459
  1,559
  1,663
  1,771
  1,883
  2,001
  2,122
  2,250
  2,382
  2,520
  2,664
  2,815
  2,972
  3,136
  3,307
  3,487
Revenue / Adjusted assets
  1.024
  1.024
  1.023
  1.024
  1.023
  1.022
  1.023
  1.022
  1.022
  1.023
  1.024
  1.023
  1.023
  1.023
  1.023
  1.023
  1.023
  1.023
  1.023
  1.023
  1.023
  1.023
  1.023
  1.023
  1.023
  1.023
  1.023
  1.023
  1.023
  1.023
Average production assets, $m
  146
  166
  186
  207
  230
  254
  279
  304
  331
  360
  389
  419
  451
  484
  518
  553
  590
  629
  669
  710
  753
  799
  846
  895
  946
  999
  1,055
  1,113
  1,174
  1,238
Working capital, $m
  -21
  -24
  -27
  -30
  -33
  -37
  -40
  -44
  -48
  -52
  -56
  -60
  -65
  -70
  -75
  -80
  -85
  -91
  -96
  -102
  -109
  -115
  -122
  -129
  -136
  -144
  -152
  -160
  -169
  -178
Total debt, $m
  21
  44
  69
  95
  122
  150
  180
  211
  244
  278
  313
  350
  388
  427
  468
  511
  555
  601
  649
  699
  752
  806
  862
  921
  983
  1,047
  1,114
  1,184
  1,257
  1,334
Total liabilities, $m
  176
  199
  224
  249
  277
  305
  335
  366
  399
  433
  468
  504
  542
  582
  623
  666
  710
  756
  804
  854
  906
  961
  1,017
  1,076
  1,138
  1,202
  1,269
  1,339
  1,412
  1,489
Total equity, $m
  236
  267
  300
  335
  371
  410
  450
  491
  535
  580
  628
  677
  728
  781
  836
  893
  953
  1,015
  1,079
  1,146
  1,216
  1,289
  1,365
  1,444
  1,527
  1,613
  1,703
  1,797
  1,895
  1,998
Total liabilities and equity, $m
  412
  466
  524
  584
  648
  715
  785
  857
  934
  1,013
  1,096
  1,181
  1,270
  1,363
  1,459
  1,559
  1,663
  1,771
  1,883
  2,000
  2,122
  2,250
  2,382
  2,520
  2,665
  2,815
  2,972
  3,136
  3,307
  3,487
Debt-to-equity ratio
  0.090
  0.170
  0.230
  0.280
  0.330
  0.370
  0.400
  0.430
  0.460
  0.480
  0.500
  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
  0.640
  0.650
  0.650
  0.660
  0.660
  0.670
Adjusted equity ratio
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  19
  21
  24
  27
  30
  33
  36
  39
  43
  46
  57
  61
  65
  70
  74
  79
  84
  89
  94
  99
  105
  111
  117
  123
  130
  137
  144
  152
  160
  168
Depreciation, amort., depletion, $m
  24
  26
  28
  31
  33
  35
  38
  40
  43
  46
  39
  42
  45
  48
  52
  55
  59
  63
  67
  71
  75
  80
  85
  89
  95
  100
  105
  111
  117
  124
Funds from operations, $m
  43
  47
  52
  57
  62
  68
  73
  79
  86
  92
  96
  103
  111
  118
  126
  134
  143
  151
  161
  170
  180
  190
  201
  213
  224
  237
  249
  263
  277
  292
Change in working capital, $m
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
Cash from operations, $m
  46
  50
  55
  60
  66
  71
  77
  83
  90
  96
  100
  108
  115
  123
  131
  139
  148
  157
  166
  176
  186
  197
  208
  220
  232
  244
  258
  271
  286
  301
Maintenance CAPEX, $m
  -13
  -15
  -17
  -19
  -21
  -23
  -25
  -28
  -30
  -33
  -36
  -39
  -42
  -45
  -48
  -52
  -55
  -59
  -63
  -67
  -71
  -75
  -80
  -85
  -89
  -95
  -100
  -105
  -111
  -117
New CAPEX, $m
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -34
  -35
  -37
  -38
  -40
  -42
  -43
  -45
  -47
  -49
  -51
  -53
  -56
  -58
  -61
  -64
Cash from investing activities, $m
  -31
  -34
  -37
  -40
  -44
  -47
  -50
  -54
  -57
  -61
  -65
  -69
  -74
  -78
  -82
  -87
  -92
  -97
  -103
  -109
  -114
  -120
  -127
  -134
  -140
  -148
  -156
  -163
  -172
  -181
Free cash flow, $m
  15
  16
  18
  20
  22
  24
  27
  29
  32
  35
  35
  38
  42
  45
  48
  52
  56
  60
  64
  68
  72
  77
  81
  86
  91
  96
  102
  108
  113
  120
Issuance/(repayment) of debt, $m
  21
  23
  24
  26
  27
  29
  30
  31
  32
  34
  35
  37
  38
  40
  41
  43
  44
  46
  48
  50
  52
  54
  57
  59
  62
  64
  67
  70
  73
  77
Issuance/(repurchase) of shares, $m
  11
  10
  9
  8
  7
  6
  4
  3
  1
  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  
  32
  33
  33
  34
  34
  35
  34
  34
  33
  34
  35
  37
  38
  40
  41
  43
  44
  46
  48
  50
  52
  54
  57
  59
  62
  64
  67
  70
  73
  77
Total cash flow (excl. dividends), $m
  47
  49
  52
  54
  56
  59
  61
  63
  65
  69
  70
  75
  80
  84
  89
  95
  100
  106
  112
  118
  124
  131
  138
  145
  153
  161
  169
  178
  187
  196
Retained Cash Flow (-), $m
  -29
  -31
  -33
  -35
  -37
  -38
  -40
  -42
  -44
  -45
  -47
  -49
  -51
  -53
  -55
  -57
  -60
  -62
  -64
  -67
  -70
  -73
  -76
  -79
  -83
  -86
  -90
  -94
  -98
  -103
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
  7
  8
  9
  10
  11
  12
  13
  14
  16
  17
  19
  20
  22
  23
  25
  27
  29
  31
  33
  35
  37
  39
  41
  44
  46
  49
  52
  55
  58
  61
Cash available for distribution, $m
  17
  18
  19
  19
  20
  20
  21
  21
  22
  23
  23
  26
  29
  31
  34
  37
  40
  44
  47
  51
  54
  58
  62
  66
  70
  74
  79
  84
  88
  93
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
  17
  17
  16
  16
  15
  15
  14
  13
  13
  12
  11
  11
  11
  11
  10
  9
  9
  8
  7
  6
  6
  5
  4
  3
  3
  2
  2
  1
  1
  1
Current shareholders' claim on cash, %
  97.6
  95.7
  94.1
  92.9
  92.0
  91.3
  90.9
  90.6
  90.5
  90.5
  90.5
  90.5
  90.5
  90.5
  90.5
  90.5
  90.5
  90.5
  90.5
  90.5
  90.5
  90.5
  90.5
  90.5
  90.5
  90.5
  90.5
  90.5
  90.5
  90.5

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 (CRAI)

Valuation Ratios
P/E Ratio 34.6
Price to Sales 1.4
Price to Book 2.2
Price to Tangible Book
Price to Cash Flow 9.4
Price to Free Cash Flow 12.8
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 $370 million for the last fiscal year's total revenue generated by CRA International. The default revenue input number comes from 2017 income statement of CRA International. 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 14% 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, 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.
    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 94.3%.

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 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.

Corporate tax rate of 27% is the nominal tax rate for CRA International. 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 1.8%.

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 34.7%.

Life of production assets of 10 years is the average useful life of capital assets used in CRA International 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 -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 - $207 million for CRA International - 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 million for CRA International 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 at the current share price and the inputted number of shares is $0.4 billion.

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COMPANY NEWS

▶ CRA International Announces New Online Trading Platform   [May-22-18 08:30AM  Business Wire]
▶ CRA: 1Q Earnings Snapshot   [Apr-26-18 10:12AM  Associated Press]
▶ CRA reports 4Q loss   [Feb-15-18 08:31AM  Associated Press]
▶ New Strong Buy Stocks for December 20th   [Dec-20-17 09:18AM  Zacks]
▶ New Strong Buy Stocks for October 30th   [Oct-30-17 11:28AM  Zacks]
▶ CRA International Inc (CRAI): Will The Growth Last?   [Oct-26-17 10:50AM  Simply Wall St.]
▶ CRA posts 3Q profit   [08:59AM  Associated Press]
▶ CRA posts 2Q profit   [01:32AM  Associated Press]
▶ CRA posts 1Q profit   [May-04-17 08:31AM  Associated Press]
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