Intrinsic value of ExlService Holdings - EXLS

Previous Close

$59.75

  Intrinsic Value

$26.26

stock screener

  Rating & Target

str. sell

-56%

Previous close

$59.75

 
Intrinsic value

$26.26

 
Up/down potential

-56%

 
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 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 2.0

 

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, %
  11.10
  10.49
  9.94
  9.45
  9.00
  8.60
  8.24
  7.92
  7.63
  7.36
  7.13
  6.91
  6.72
  6.55
  6.40
  6.26
  6.13
  6.02
  5.92
  5.82
  5.74
  5.67
  5.60
  5.54
  5.49
  5.44
  5.39
  5.35
  5.32
  5.29
Revenue, $m
  847
  935
  1,028
  1,126
  1,227
  1,332
  1,442
  1,556
  1,675
  1,798
  1,927
  2,060
  2,198
  2,342
  2,492
  2,648
  2,810
  2,979
  3,156
  3,339
  3,531
  3,731
  3,940
  4,159
  4,387
  4,625
  4,875
  5,136
  5,409
  5,695
Variable operating expenses, $m
  755
  831
  912
  995
  1,083
  1,174
  1,268
  1,367
  1,469
  1,575
  1,660
  1,775
  1,894
  2,019
  2,148
  2,282
  2,422
  2,568
  2,720
  2,878
  3,043
  3,216
  3,396
  3,584
  3,780
  3,986
  4,201
  4,426
  4,661
  4,908
Fixed operating expenses, $m
  8
  8
  9
  9
  9
  9
  9
  10
  10
  10
  10
  10
  11
  11
  11
  11
  12
  12
  12
  12
  13
  13
  13
  13
  14
  14
  14
  15
  15
  15
Total operating expenses, $m
  763
  839
  921
  1,004
  1,092
  1,183
  1,277
  1,377
  1,479
  1,585
  1,670
  1,785
  1,905
  2,030
  2,159
  2,293
  2,434
  2,580
  2,732
  2,890
  3,056
  3,229
  3,409
  3,597
  3,794
  4,000
  4,215
  4,441
  4,676
  4,923
Operating income, $m
  84
  96
  108
  122
  135
  150
  165
  180
  196
  213
  256
  274
  293
  313
  333
  355
  377
  400
  424
  449
  475
  503
  531
  561
  592
  625
  659
  695
  732
  772
EBITDA, $m
  143
  158
  175
  192
  210
  228
  248
  268
  289
  311
  333
  357
  381
  407
  433
  461
  489
  519
  550
  583
  617
  652
  689
  728
  768
  810
  854
  901
  949
  999
Interest expense (income), $m
  1
  3
  4
  5
  7
  8
  10
  11
  13
  15
  17
  18
  20
  22
  25
  27
  29
  31
  34
  36
  39
  42
  45
  48
  51
  54
  58
  61
  65
  69
  73
Earnings before tax, $m
  81
  92
  103
  115
  127
  140
  153
  167
  182
  197
  238
  254
  271
  288
  307
  326
  345
  366
  388
  410
  433
  458
  484
  510
  538
  567
  598
  630
  663
  698
Tax expense, $m
  22
  25
  28
  31
  34
  38
  41
  45
  49
  53
  64
  69
  73
  78
  83
  88
  93
  99
  105
  111
  117
  124
  131
  138
  145
  153
  161
  170
  179
  189
Net income, $m
  59
  67
  75
  84
  93
  102
  112
  122
  133
  144
  173
  185
  198
  210
  224
  238
  252
  267
  283
  299
  316
  334
  353
  372
  393
  414
  436
  460
  484
  510

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
  773
  854
  939
  1,028
  1,120
  1,217
  1,317
  1,421
  1,530
  1,642
  1,759
  1,881
  2,008
  2,139
  2,276
  2,418
  2,566
  2,721
  2,882
  3,050
  3,225
  3,408
  3,598
  3,798
  4,006
  4,224
  4,452
  4,690
  4,940
  5,201
Adjusted assets (=assets-cash), $m
  773
  854
  939
  1,028
  1,120
  1,217
  1,317
  1,421
  1,530
  1,642
  1,759
  1,881
  2,008
  2,139
  2,276
  2,418
  2,566
  2,721
  2,882
  3,050
  3,225
  3,408
  3,598
  3,798
  4,006
  4,224
  4,452
  4,690
  4,940
  5,201
Revenue / Adjusted assets
  1.096
  1.095
  1.095
  1.095
  1.096
  1.094
  1.095
  1.095
  1.095
  1.095
  1.096
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
Average production assets, $m
  339
  374
  411
  450
  491
  533
  577
  623
  670
  719
  771
  824
  879
  937
  997
  1,059
  1,124
  1,192
  1,262
  1,336
  1,412
  1,493
  1,576
  1,663
  1,755
  1,850
  1,950
  2,054
  2,164
  2,278
Working capital, $m
  -7
  -7
  -8
  -9
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -27
  -28
  -30
  -32
  -33
  -35
  -37
  -39
  -41
  -43
  -46
Total debt, $m
  75
  100
  126
  153
  182
  211
  242
  274
  308
  342
  378
  416
  455
  495
  537
  581
  627
  675
  724
  776
  830
  886
  945
  1,006
  1,070
  1,138
  1,208
  1,281
  1,358
  1,438
Total liabilities, $m
  238
  263
  289
  317
  345
  375
  406
  438
  471
  506
  542
  579
  618
  659
  701
  745
  790
  838
  888
  939
  993
  1,050
  1,108
  1,170
  1,234
  1,301
  1,371
  1,445
  1,521
  1,602
Total equity, $m
  535
  591
  650
  711
  775
  842
  911
  984
  1,059
  1,137
  1,218
  1,302
  1,389
  1,480
  1,575
  1,673
  1,776
  1,883
  1,994
  2,110
  2,232
  2,358
  2,490
  2,628
  2,772
  2,923
  3,081
  3,246
  3,418
  3,599
Total liabilities and equity, $m
  773
  854
  939
  1,028
  1,120
  1,217
  1,317
  1,422
  1,530
  1,643
  1,760
  1,881
  2,007
  2,139
  2,276
  2,418
  2,566
  2,721
  2,882
  3,049
  3,225
  3,408
  3,598
  3,798
  4,006
  4,224
  4,452
  4,691
  4,939
  5,201
Debt-to-equity ratio
  0.140
  0.170
  0.190
  0.220
  0.230
  0.250
  0.270
  0.280
  0.290
  0.300
  0.310
  0.320
  0.330
  0.330
  0.340
  0.350
  0.350
  0.360
  0.360
  0.370
  0.370
  0.380
  0.380
  0.380
  0.390
  0.390
  0.390
  0.390
  0.400
  0.400
Adjusted equity ratio
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  59
  67
  75
  84
  93
  102
  112
  122
  133
  144
  173
  185
  198
  210
  224
  238
  252
  267
  283
  299
  316
  334
  353
  372
  393
  414
  436
  460
  484
  510
Depreciation, amort., depletion, $m
  59
  63
  66
  70
  74
  79
  83
  88
  92
  97
  77
  82
  88
  94
  100
  106
  112
  119
  126
  134
  141
  149
  158
  166
  175
  185
  195
  205
  216
  228
Funds from operations, $m
  118
  130
  142
  154
  167
  181
  195
  210
  225
  241
  251
  268
  286
  304
  323
  344
  365
  386
  409
  433
  458
  484
  511
  539
  568
  599
  631
  665
  701
  738
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
  119
  130
  142
  155
  168
  182
  196
  211
  226
  242
  252
  269
  287
  305
  325
  345
  366
  388
  411
  434
  459
  485
  512
  541
  570
  601
  633
  667
  703
  740
Maintenance CAPEX, $m
  -30
  -34
  -37
  -41
  -45
  -49
  -53
  -58
  -62
  -67
  -72
  -77
  -82
  -88
  -94
  -100
  -106
  -112
  -119
  -126
  -134
  -141
  -149
  -158
  -166
  -175
  -185
  -195
  -205
  -216
New CAPEX, $m
  -34
  -36
  -37
  -39
  -41
  -42
  -44
  -46
  -47
  -49
  -51
  -53
  -55
  -58
  -60
  -62
  -65
  -68
  -70
  -74
  -77
  -80
  -84
  -87
  -91
  -95
  -100
  -104
  -109
  -114
Cash from investing activities, $m
  -64
  -70
  -74
  -80
  -86
  -91
  -97
  -104
  -109
  -116
  -123
  -130
  -137
  -146
  -154
  -162
  -171
  -180
  -189
  -200
  -211
  -221
  -233
  -245
  -257
  -270
  -285
  -299
  -314
  -330
Free cash flow, $m
  55
  61
  68
  75
  82
  90
  99
  107
  116
  125
  128
  138
  149
  160
  171
  183
  195
  208
  221
  235
  249
  264
  279
  296
  313
  330
  349
  368
  388
  409
Issuance/(repayment) of debt, $m
  24
  25
  26
  27
  28
  30
  31
  32
  33
  35
  36
  37
  39
  41
  42
  44
  46
  48
  50
  52
  54
  56
  59
  61
  64
  67
  70
  73
  77
  80
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  
  24
  25
  26
  27
  28
  30
  31
  32
  33
  35
  36
  37
  39
  41
  42
  44
  46
  48
  50
  52
  54
  56
  59
  61
  64
  67
  70
  73
  77
  80
Total cash flow (excl. dividends), $m
  78
  86
  94
  102
  111
  120
  129
  139
  150
  160
  164
  176
  188
  200
  213
  227
  241
  255
  270
  286
  303
  320
  338
  357
  377
  397
  419
  441
  465
  490
Retained Cash Flow (-), $m
  -53
  -56
  -59
  -61
  -64
  -67
  -69
  -72
  -75
  -78
  -81
  -84
  -88
  -91
  -95
  -99
  -103
  -107
  -111
  -116
  -121
  -126
  -132
  -138
  -144
  -151
  -158
  -165
  -173
  -181
Prev. year cash balance distribution, $m
  118
  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
  23
  25
  28
  31
  34
  37
  40
  43
  47
  50
  54
  58
  62
  66
  70
  75
  79
  84
  89
  95
  100
  106
  112
  118
  125
  132
  139
  146
  154
  162
Cash available for distribution, $m
  144
  30
  35
  41
  47
  53
  60
  67
  75
  82
  83
  92
  100
  109
  119
  128
  138
  148
  159
  170
  182
  194
  206
  219
  233
  247
  261
  276
  292
  309
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
  138
  27
  31
  34
  36
  39
  41
  42
  43
  43
  40
  39
  38
  37
  35
  33
  30
  27
  24
  22
  19
  16
  14
  11
  9
  7
  6
  4
  3
  2
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

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 (EXLS)

Valuation Ratios
P/E Ratio 32.4
Price to Sales 2.9
Price to Book 3.8
Price to Tangible Book
Price to Cash Flow 20.1
Price to Free Cash Flow 27.2
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 $762 million for the last fiscal year's total revenue generated by ExlService Holdings. The default revenue input number comes from 2017 income statement of ExlService Holdings. 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 11.1% 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 EXLS is calculated based on our internal credit rating of ExlService Holdings, 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.
    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 89.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $8 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.

Corporate tax rate of 27% is the nominal tax rate for ExlService Holdings. 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 3%.

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 40%.

Life of production assets of 10 years is the average useful life of capital assets used in ExlService Holdings 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 -0.8%. 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 - $600 million for ExlService Holdings - 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 million for ExlService Holdings 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 at the current share price and the inputted number of shares is $2.0 billion.

RELATED COMPANIES Price Int.Val. Rating
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COMPANY NEWS

▶ ExlService Holdings: 2Q Earnings Snapshot   [08:37AM  Associated Press]
▶ EXL Reports 2018 Second Quarter Results   [06:00AM  GlobeNewswire]
▶ EXL closes the acquisition of SCIOInspire Holdings, Inc.   [Jul-02-18 04:30PM  GlobeNewswire]
▶ NY company will bring 250 jobs to Lee's Summit   [Jun-25-18 12:21PM  American City Business Journals]
▶ ExlService Holdings: 1Q Earnings Snapshot   [May-01-18 06:22AM  Associated Press]
▶ EXL Reports 2018 First Quarter Results   [06:00AM  GlobeNewswire]
▶ ExlService Holdings reports 4Q loss   [09:09AM  Associated Press]
▶ ExlService Holdings beats Street 3Q forecasts   [Oct-26-17 08:17AM  Associated Press]
▶ EXL Reports 2017 Third Quarter Results   [06:00AM  GlobeNewswire]
▶ Top Ranked Growth Stocks to Buy for August 17th   [Aug-17-17 09:42AM  Zacks]
▶ Top Ranked Growth Stocks to Buy for August 2nd   [Aug-02-17 09:53AM  Zacks]
▶ ExlService Holdings tops Street 2Q forecasts   [01:39AM  Associated Press]
▶ EXL Reports 2017 Second Quarter Results   [06:00AM  GlobeNewswire]
▶ EXL Launches New Delivery Centers in Chennai and Hyderabad   [Jun-26-17 08:30AM  GlobeNewswire]
▶ Biotech Musical Chairs: Who Leads Next   [May-31-17 06:00AM  Investopedia]
▶ ExlService Holdings tops Street 1Q forecasts   [06:29AM  Associated Press]
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