Intrinsic value of ExlService Holdings, Inc. - EXLS

Previous Close

$60.28

  Intrinsic Value

$27.22

stock screener

  Rating & Target

str. sell

-55%

Previous close

$60.28

 
Intrinsic value

$27.22

 
Up/down potential

-55%

 
Rating

str. sell

We calculate the intrinsic value of EXLS 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 2.1

 

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, %
  18.70
  17.33
  16.10
  14.99
  13.99
  13.09
  12.28
  11.55
  10.90
  10.31
  9.78
  9.30
  8.87
  8.48
  8.13
  7.82
  7.54
  7.28
  7.06
  6.85
  6.67
  6.50
  6.35
  6.21
  6.09
  5.98
  5.89
  5.80
  5.72
  5.65
Revenue, $m
  1,048
  1,230
  1,428
  1,642
  1,871
  2,116
  2,376
  2,651
  2,940
  3,243
  3,560
  3,891
  4,236
  4,595
  4,969
  5,357
  5,761
  6,181
  6,617
  7,070
  7,542
  8,032
  8,542
  9,072
  9,625
  10,201
  10,801
  11,428
  12,081
  12,763
Variable operating expenses, $m
  947
  1,110
  1,288
  1,479
  1,685
  1,905
  2,138
  2,384
  2,643
  2,915
  3,192
  3,488
  3,798
  4,120
  4,455
  4,803
  5,166
  5,542
  5,933
  6,339
  6,762
  7,201
  7,659
  8,135
  8,630
  9,147
  9,685
  10,246
  10,832
  11,443
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
  947
  1,110
  1,288
  1,479
  1,685
  1,905
  2,138
  2,384
  2,643
  2,915
  3,192
  3,488
  3,798
  4,120
  4,455
  4,803
  5,166
  5,542
  5,933
  6,339
  6,762
  7,201
  7,659
  8,135
  8,630
  9,147
  9,685
  10,246
  10,832
  11,443
Operating income, $m
  101
  120
  140
  162
  186
  211
  238
  267
  296
  328
  368
  402
  438
  475
  514
  554
  596
  639
  684
  731
  780
  830
  883
  938
  995
  1,055
  1,117
  1,181
  1,249
  1,319
EBITDA, $m
  142
  167
  194
  223
  254
  287
  322
  359
  399
  440
  483
  528
  574
  623
  674
  726
  781
  838
  897
  959
  1,023
  1,089
  1,158
  1,230
  1,305
  1,383
  1,465
  1,549
  1,638
  1,731
Interest expense (income), $m
  1
  15
  20
  24
  29
  35
  41
  47
  54
  61
  69
  76
  85
  93
  102
  111
  121
  131
  141
  152
  164
  175
  187
  200
  213
  227
  241
  256
  272
  288
  305
Earnings before tax, $m
  86
  100
  116
  133
  151
  170
  191
  213
  235
  259
  292
  318
  345
  373
  402
  433
  465
  498
  532
  567
  604
  643
  683
  725
  768
  813
  861
  910
  961
  1,015
Tax expense, $m
  23
  27
  31
  36
  41
  46
  52
  57
  64
  70
  79
  86
  93
  101
  109
  117
  125
  134
  144
  153
  163
  174
  184
  196
  207
  220
  232
  246
  259
  274
Net income, $m
  62
  73
  85
  97
  110
  124
  139
  155
  172
  189
  213
  232
  252
  272
  294
  316
  339
  363
  388
  414
  441
  469
  499
  529
  561
  594
  628
  664
  702
  741

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
  1,076
  1,263
  1,466
  1,686
  1,921
  2,173
  2,440
  2,721
  3,018
  3,329
  3,655
  3,994
  4,349
  4,718
  5,101
  5,500
  5,915
  6,346
  6,794
  7,259
  7,743
  8,246
  8,770
  9,315
  9,882
  10,473
  11,090
  11,733
  12,403
  13,104
Adjusted assets (=assets-cash), $m
  1,076
  1,263
  1,466
  1,686
  1,921
  2,173
  2,440
  2,721
  3,018
  3,329
  3,655
  3,994
  4,349
  4,718
  5,101
  5,500
  5,915
  6,346
  6,794
  7,259
  7,743
  8,246
  8,770
  9,315
  9,882
  10,473
  11,090
  11,733
  12,403
  13,104
Revenue / Adjusted assets
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
  0.974
Average production assets, $m
  290
  341
  395
  455
  518
  586
  658
  734
  814
  898
  986
  1,078
  1,173
  1,273
  1,376
  1,484
  1,596
  1,712
  1,833
  1,958
  2,089
  2,225
  2,366
  2,513
  2,666
  2,826
  2,992
  3,165
  3,346
  3,535
Working capital, $m
  92
  108
  126
  144
  165
  186
  209
  233
  259
  285
  313
  342
  373
  404
  437
  471
  507
  544
  582
  622
  664
  707
  752
  798
  847
  898
  951
  1,006
  1,063
  1,123
Total debt, $m
  364
  451
  546
  648
  758
  875
  1,000
  1,131
  1,269
  1,414
  1,566
  1,724
  1,889
  2,061
  2,240
  2,426
  2,619
  2,820
  3,029
  3,246
  3,471
  3,706
  3,950
  4,204
  4,468
  4,744
  5,031
  5,330
  5,643
  5,969
Total liabilities, $m
  501
  588
  683
  785
  895
  1,013
  1,137
  1,268
  1,406
  1,551
  1,703
  1,861
  2,027
  2,198
  2,377
  2,563
  2,756
  2,957
  3,166
  3,383
  3,608
  3,843
  4,087
  4,341
  4,605
  4,881
  5,168
  5,467
  5,780
  6,106
Total equity, $m
  575
  674
  783
  900
  1,026
  1,160
  1,303
  1,453
  1,612
  1,778
  1,952
  2,133
  2,322
  2,519
  2,724
  2,937
  3,159
  3,389
  3,628
  3,876
  4,135
  4,403
  4,683
  4,974
  5,277
  5,593
  5,922
  6,265
  6,623
  6,997
Total liabilities and equity, $m
  1,076
  1,262
  1,466
  1,685
  1,921
  2,173
  2,440
  2,721
  3,018
  3,329
  3,655
  3,994
  4,349
  4,717
  5,101
  5,500
  5,915
  6,346
  6,794
  7,259
  7,743
  8,246
  8,770
  9,315
  9,882
  10,474
  11,090
  11,732
  12,403
  13,103
Debt-to-equity ratio
  0.630
  0.670
  0.700
  0.720
  0.740
  0.750
  0.770
  0.780
  0.790
  0.800
  0.800
  0.810
  0.810
  0.820
  0.820
  0.830
  0.830
  0.830
  0.830
  0.840
  0.840
  0.840
  0.840
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
  0.850
Adjusted equity ratio
  0.534
  0.534
  0.534
  0.534
  0.534
  0.534
  0.534
  0.534
  0.534
  0.534
  0.534
  0.534
  0.534
  0.534
  0.534
  0.534
  0.534
  0.534
  0.534
  0.534
  0.534
  0.534
  0.534
  0.534
  0.534
  0.534
  0.534
  0.534
  0.534
  0.534

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  62
  73
  85
  97
  110
  124
  139
  155
  172
  189
  213
  232
  252
  272
  294
  316
  339
  363
  388
  414
  441
  469
  499
  529
  561
  594
  628
  664
  702
  741
Depreciation, amort., depletion, $m
  41
  47
  53
  60
  68
  76
  84
  93
  102
  112
  115
  125
  136
  148
  160
  173
  186
  199
  213
  228
  243
  259
  275
  292
  310
  329
  348
  368
  389
  411
Funds from operations, $m
  104
  120
  138
  157
  178
  200
  223
  248
  274
  301
  328
  357
  388
  420
  454
  489
  525
  562
  601
  642
  684
  728
  774
  821
  871
  922
  976
  1,032
  1,091
  1,152
Change in working capital, $m
  15
  16
  17
  19
  20
  22
  23
  24
  25
  27
  28
  29
  30
  32
  33
  34
  36
  37
  38
  40
  41
  43
  45
  47
  49
  51
  53
  55
  57
  60
Cash from operations, $m
  89
  104
  121
  138
  158
  178
  200
  224
  249
  274
  300
  328
  358
  389
  421
  454
  489
  525
  563
  602
  643
  685
  729
  774
  822
  872
  923
  977
  1,033
  1,092
Maintenance CAPEX, $m
  -28
  -34
  -40
  -46
  -53
  -60
  -68
  -77
  -85
  -95
  -104
  -115
  -125
  -136
  -148
  -160
  -173
  -186
  -199
  -213
  -228
  -243
  -259
  -275
  -292
  -310
  -329
  -348
  -368
  -389
New CAPEX, $m
  -45
  -50
  -55
  -59
  -64
  -68
  -72
  -76
  -80
  -84
  -88
  -92
  -96
  -100
  -104
  -108
  -112
  -116
  -121
  -126
  -131
  -136
  -141
  -147
  -153
  -160
  -166
  -173
  -181
  -189
Cash from investing activities, $m
  -73
  -84
  -95
  -105
  -117
  -128
  -140
  -153
  -165
  -179
  -192
  -207
  -221
  -236
  -252
  -268
  -285
  -302
  -320
  -339
  -359
  -379
  -400
  -422
  -445
  -470
  -495
  -521
  -549
  -578
Free cash flow, $m
  15
  20
  26
  33
  41
  50
  60
  71
  83
  96
  107
  122
  137
  153
  169
  187
  205
  224
  243
  263
  284
  306
  329
  352
  377
  402
  428
  456
  484
  514
Issuance/(repayment) of debt, $m
  79
  87
  95
  102
  110
  117
  124
  131
  138
  145
  152
  158
  165
  172
  179
  186
  193
  201
  209
  217
  225
  234
  244
  254
  264
  276
  287
  300
  313
  326
Issuance/(repurchase) of shares, $m
  28
  27
  24
  20
  16
  10
  3
  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  
  107
  114
  119
  122
  126
  127
  127
  131
  138
  145
  152
  158
  165
  172
  179
  186
  193
  201
  209
  217
  225
  234
  244
  254
  264
  276
  287
  300
  313
  326
Total cash flow (excl. dividends), $m
  122
  133
  145
  156
  167
  177
  188
  203
  221
  241
  259
  280
  302
  325
  348
  373
  398
  424
  452
  480
  510
  541
  573
  606
  641
  678
  716
  755
  797
  840
Retained Cash Flow (-), $m
  -90
  -100
  -109
  -117
  -126
  -134
  -142
  -151
  -158
  -166
  -174
  -181
  -189
  -197
  -205
  -213
  -221
  -230
  -239
  -249
  -258
  -269
  -280
  -291
  -303
  -316
  -329
  -343
  -358
  -374
Prev. year cash balance distribution, $m
  134
  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
  165
  34
  36
  39
  41
  43
  45
  52
  63
  75
  85
  99
  113
  128
  143
  160
  177
  194
  213
  232
  251
  272
  293
  315
  338
  362
  386
  412
  439
  466
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
  159
  31
  32
  32
  32
  31
  31
  33
  36
  39
  40
  42
  43
  43
  42
  41
  38
  36
  33
  29
  26
  23
  19
  16
  13
  11
  8
  6
  5
  4
Current shareholders' claim on cash, %
  98.3
  97.0
  96.0
  95.2
  94.7
  94.5
  94.4
  94.4
  94.4
  94.4
  94.4
  94.4
  94.4
  94.4
  94.4
  94.4
  94.4
  94.4
  94.4
  94.4
  94.4
  94.4
  94.4
  94.4
  94.4
  94.4
  94.4
  94.4
  94.4
  94.4

ExlService Holdings, Inc. is an operations management and analytics company. The Company segments include Insurance; Healthcare; Travel, Transportation and Logistics; Finance and Accounting (F&A); Analytics, and All Other. The Insurance operating segment serves property and casualty insurance, life insurance, disability insurance, annuity and retirement services companies. The Healthcare operating segment serves healthcare payers and providers. The Travel, Transportation and Logistics operating segment primarily serves clients in the travel, transport and logistics industries. The F&A operating segment provides finance and accounting business process management (BPM) services across an array of F&A processes. The Analytics services focus on driving business outcomes for its customers by generating data-driven insights across all parts of its customers' businesses. The All Other segment includes banking and financial services, utilities and consulting operating segments.

FINANCIAL RATIOS  of  ExlService Holdings, Inc. (EXLS)

Valuation Ratios
P/E Ratio 32.7
Price to Sales 3
Price to Book 3.8
Price to Tangible Book
Price to Cash Flow 20.3
Price to Free Cash Flow 27.4
Growth Rates
Sales Growth Rate 9.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate 10.2%
Financial Strength
Quick Ratio 23
Current Ratio 0.2
LT Debt to Equity 6.8%
Total Debt to Equity 8.6%
Interest Coverage 85
Management Effectiveness
Return On Assets 9.2%
Ret/ On Assets - 3 Yr. Avg. 8%
Return On Total Capital 11.1%
Ret/ On T. Cap. - 3 Yr. Avg. 9.7%
Return On Equity 12.4%
Return On Equity - 3 Yr. Avg. 10.8%
Asset Turnover 1
Profitability Ratios
Gross Margin 34.7%
Gross Margin - 3 Yr. Avg. 34.7%
EBITDA Margin 17.5%
EBITDA Margin - 3 Yr. Avg. 16%
Operating Margin 9.3%
Oper. Margin - 3 Yr. Avg. 8.9%
Pre-Tax Margin 12.2%
Pre-Tax Margin - 3 Yr. Avg. 10.7%
Net Profit Margin 9%
Net Profit Margin - 3 Yr. Avg. 7.9%
Effective Tax Rate 26.2%
Eff/ Tax Rate - 3 Yr. Avg. 24.5%
Payout Ratio 0%

EXLS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the EXLS stock intrinsic value calculation we used $883 million for the last fiscal year's total revenue generated by ExlService Holdings, Inc.. The default revenue input number comes from 0001 income statement of ExlService Holdings, 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 EXLS stock valuation model: a) initial revenue growth rate of 18.7% 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 EXLS is calculated based on our internal credit rating of ExlService Holdings, 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 ExlService Holdings, 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 EXLS stock the variable cost ratio is equal to 90.5%.

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 EXLS 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 ExlService Holdings, Inc..

Corporate tax rate of 27% is the nominal tax rate for ExlService Holdings, 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 EXLS 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 EXLS are equal to 27.7%.

Life of production assets of 8.6 years is the average useful life of capital assets used in ExlService Holdings, 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 EXLS is equal to 8.8%. 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 - $618.069 million for ExlService Holdings, 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 34.260 million for ExlService Holdings, 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 ExlService Holdings, Inc. at the current share price and the inputted number of shares is $2.1 billion.

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