Intrinsic value of CRA International - CRAI

Previous Close

$44.82

  Intrinsic Value

$35.13

stock screener

  Rating & Target

sell

-22%

Previous close

$44.82

 
Intrinsic value

$35.13

 
Up/down potential

-22%

 
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 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 0.4

 

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, %
  12.80
  12.02
  11.32
  10.69
  10.12
  9.61
  9.15
  8.73
  8.36
  8.02
  7.72
  7.45
  7.20
  6.98
  6.78
  6.61
  6.45
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
Revenue, $m
  417
  468
  521
  576
  634
  695
  759
  825
  894
  966
  1,041
  1,118
  1,199
  1,282
  1,369
  1,460
  1,554
  1,652
  1,754
  1,860
  1,970
  2,086
  2,206
  2,332
  2,463
  2,600
  2,743
  2,892
  3,049
  3,212
Variable operating expenses, $m
  392
  437
  486
  537
  590
  646
  704
  765
  828
  893
  952
  1,022
  1,096
  1,173
  1,252
  1,335
  1,421
  1,510
  1,604
  1,701
  1,802
  1,907
  2,017
  2,132
  2,252
  2,377
  2,508
  2,645
  2,788
  2,938
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
  392
  437
  486
  537
  590
  646
  704
  765
  828
  893
  952
  1,022
  1,096
  1,173
  1,252
  1,335
  1,421
  1,510
  1,604
  1,701
  1,802
  1,907
  2,017
  2,132
  2,252
  2,377
  2,508
  2,645
  2,788
  2,938
Operating income, $m
  26
  30
  35
  39
  44
  50
  55
  61
  67
  73
  89
  96
  103
  110
  117
  125
  133
  141
  150
  159
  169
  178
  189
  199
  211
  222
  235
  247
  261
  275
EBITDA, $m
  42
  47
  53
  58
  64
  70
  77
  84
  91
  98
  105
  113
  121
  130
  139
  148
  157
  167
  178
  188
  200
  211
  223
  236
  249
  263
  278
  293
  309
  325
Interest expense (income), $m
  0
  0
  1
  2
  3
  5
  6
  7
  9
  10
  12
  13
  15
  17
  19
  21
  23
  25
  27
  29
  31
  34
  36
  39
  41
  44
  47
  50
  54
  57
  61
Earnings before tax, $m
  26
  29
  33
  36
  40
  44
  48
  52
  56
  61
  76
  80
  86
  91
  97
  102
  108
  115
  121
  128
  135
  142
  150
  158
  166
  175
  184
  194
  204
  214
Tax expense, $m
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  20
  22
  23
  25
  26
  28
  29
  31
  33
  35
  36
  38
  40
  43
  45
  47
  50
  52
  55
  58
Net income, $m
  19
  21
  24
  26
  29
  32
  35
  38
  41
  45
  55
  59
  63
  66
  70
  75
  79
  84
  88
  93
  98
  104
  109
  115
  121
  128
  134
  141
  149
  156

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
  408
  457
  509
  563
  620
  680
  742
  807
  874
  944
  1,017
  1,093
  1,172
  1,253
  1,338
  1,427
  1,519
  1,615
  1,714
  1,818
  1,926
  2,039
  2,156
  2,279
  2,407
  2,541
  2,681
  2,827
  2,980
  3,140
Adjusted assets (=assets-cash), $m
  408
  457
  509
  563
  620
  680
  742
  807
  874
  944
  1,017
  1,093
  1,172
  1,253
  1,338
  1,427
  1,519
  1,615
  1,714
  1,818
  1,926
  2,039
  2,156
  2,279
  2,407
  2,541
  2,681
  2,827
  2,980
  3,140
Revenue / Adjusted assets
  1.022
  1.024
  1.024
  1.023
  1.023
  1.022
  1.023
  1.022
  1.023
  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
  95
  107
  119
  131
  145
  159
  173
  188
  204
  220
  237
  255
  273
  292
  312
  333
  354
  377
  400
  424
  449
  476
  503
  532
  562
  593
  625
  659
  695
  732
Working capital, $m
  3
  3
  4
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
  12
  12
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
Total debt, $m
  20
  41
  63
  86
  111
  136
  163
  190
  219
  249
  280
  313
  347
  382
  418
  456
  495
  536
  579
  623
  670
  718
  768
  821
  875
  933
  993
  1,055
  1,121
  1,189
Total liabilities, $m
  175
  196
  218
  241
  265
  291
  318
  345
  374
  404
  435
  468
  501
  536
  573
  611
  650
  691
  734
  778
  824
  873
  923
  976
  1,030
  1,088
  1,147
  1,210
  1,276
  1,344
Total equity, $m
  233
  261
  291
  322
  355
  389
  424
  461
  500
  540
  582
  625
  670
  717
  766
  816
  869
  924
  981
  1,040
  1,102
  1,166
  1,234
  1,304
  1,377
  1,454
  1,534
  1,617
  1,705
  1,796
Total liabilities and equity, $m
  408
  457
  509
  563
  620
  680
  742
  806
  874
  944
  1,017
  1,093
  1,171
  1,253
  1,339
  1,427
  1,519
  1,615
  1,715
  1,818
  1,926
  2,039
  2,157
  2,280
  2,407
  2,542
  2,681
  2,827
  2,981
  3,140
Debt-to-equity ratio
  0.080
  0.160
  0.220
  0.270
  0.310
  0.350
  0.380
  0.410
  0.440
  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
  0.620
  0.630
  0.640
  0.640
  0.650
  0.650
  0.660
  0.660
Adjusted equity ratio
  0.572
  0.572
  0.572
  0.572
  0.572
  0.572
  0.572
  0.572
  0.572
  0.572
  0.572
  0.572
  0.572
  0.572
  0.572
  0.572
  0.572
  0.572
  0.572
  0.572
  0.572
  0.572
  0.572
  0.572
  0.572
  0.572
  0.572
  0.572
  0.572
  0.572

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  19
  21
  24
  26
  29
  32
  35
  38
  41
  45
  55
  59
  63
  66
  70
  75
  79
  84
  88
  93
  98
  104
  109
  115
  121
  128
  134
  141
  149
  156
Depreciation, amort., depletion, $m
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  16
  18
  19
  20
  22
  23
  24
  26
  28
  29
  31
  33
  35
  37
  39
  41
  43
  45
  48
  51
Funds from operations, $m
  35
  38
  42
  45
  49
  53
  57
  61
  65
  70
  72
  76
  81
  87
  92
  98
  103
  110
  116
  123
  129
  137
  144
  152
  160
  169
  178
  187
  197
  207
Change in working capital, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
Cash from operations, $m
  35
  38
  41
  45
  48
  52
  56
  60
  65
  69
  71
  76
  81
  86
  91
  97
  103
  109
  115
  122
  129
  136
  143
  151
  159
  168
  177
  186
  196
  206
Maintenance CAPEX, $m
  -6
  -7
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -18
  -19
  -20
  -22
  -23
  -24
  -26
  -28
  -29
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -48
New CAPEX, $m
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -33
  -34
  -36
  -37
Cash from investing activities, $m
  -17
  -18
  -19
  -21
  -22
  -24
  -26
  -27
  -29
  -30
  -32
  -34
  -36
  -38
  -40
  -43
  -44
  -46
  -49
  -52
  -54
  -57
  -60
  -64
  -67
  -70
  -74
  -77
  -81
  -85
Free cash flow, $m
  18
  20
  22
  24
  26
  28
  31
  33
  36
  39
  39
  42
  45
  48
  51
  55
  58
  62
  66
  70
  74
  79
  83
  88
  93
  98
  103
  109
  114
  121
Issuance/(repayment) of debt, $m
  20
  21
  22
  23
  24
  25
  27
  28
  29
  30
  31
  32
  34
  35
  36
  38
  39
  41
  43
  44
  46
  48
  50
  53
  55
  57
  60
  63
  65
  68
Issuance/(repurchase) of shares, $m
  8
  7
  6
  5
  4
  2
  1
  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  
  28
  28
  28
  28
  28
  27
  28
  28
  29
  30
  31
  32
  34
  35
  36
  38
  39
  41
  43
  44
  46
  48
  50
  53
  55
  57
  60
  63
  65
  68
Total cash flow (excl. dividends), $m
  46
  48
  50
  52
  54
  56
  58
  61
  65
  69
  70
  74
  79
  83
  88
  93
  98
  103
  109
  114
  120
  127
  133
  140
  148
  155
  163
  171
  180
  189
Retained Cash Flow (-), $m
  -27
  -28
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -40
  -42
  -43
  -45
  -47
  -49
  -51
  -53
  -55
  -57
  -59
  -62
  -64
  -67
  -70
  -73
  -77
  -80
  -84
  -87
  -91
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
  19
  20
  20
  21
  21
  22
  22
  24
  26
  28
  28
  31
  34
  36
  39
  42
  45
  48
  52
  55
  59
  62
  66
  70
  74
  79
  83
  88
  92
  97
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
  18
  18
  18
  17
  17
  16
  15
  15
  15
  15
  13
  13
  13
  12
  11
  11
  10
  9
  8
  7
  6
  5
  4
  4
  3
  2
  2
  1
  1
  1
Current shareholders' claim on cash, %
  97.9
  96.3
  95.1
  94.2
  93.6
  93.3
  93.2
  93.2
  93.2
  93.2
  93.2
  93.2
  93.2
  93.2
  93.2
  93.2
  93.2
  93.2
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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 (CRAI)

Valuation Ratios
P/E Ratio 28.7
Price to Sales 1.1
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow 7.8
Price to Free Cash Flow 10.7
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 $370.075 million for the last fiscal year's total revenue generated by CRA International. The default revenue input number comes from 0001 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 12.8% 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 94.1%.

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 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 22.8%.

Life of production assets of 14.5 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 0.7%. 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 - $206.908 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 8.08 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: 3Q Earnings Snapshot   [Nov-01-18 08:14AM  Associated Press]
▶ Is CRA International Inc (NASDAQ:CRAI) Cheap And High Growth?   [Oct-02-18 08:27AM  Simply Wall St.]
▶ CRA Expert Recognized for Best Theoretical Paper Award 2018   [Sep-17-18 08:30AM  Business Wire]
▶ CRA: 2Q Earnings Snapshot   [09:43AM  Associated Press]
▶ 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]

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