Intrinsic value of ExlService Holdings - EXLS

Previous Close

$58.44

  Intrinsic Value

$29.11

stock screener

  Rating & Target

str. sell

-50%

Previous close

$58.44

 
Intrinsic value

$29.11

 
Up/down potential

-50%

 
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 2.0

 

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, %
  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
  936
  1,029
  1,126
  1,227
  1,333
  1,443
  1,557
  1,676
  1,799
  1,927
  2,061
  2,199
  2,343
  2,493
  2,649
  2,811
  2,981
  3,157
  3,341
  3,533
  3,733
  3,942
  4,160
  4,389
  4,627
  4,877
  5,138
  5,411
  5,697
Variable operating expenses, $m
  759
  835
  916
  1,000
  1,088
  1,179
  1,274
  1,373
  1,476
  1,583
  1,669
  1,784
  1,904
  2,029
  2,158
  2,293
  2,434
  2,580
  2,733
  2,892
  3,058
  3,232
  3,413
  3,602
  3,799
  4,006
  4,222
  4,448
  4,685
  4,932
Fixed operating expenses, $m
  5
  5
  5
  5
  6
  6
  6
  6
  6
  6
  6
  6
  7
  7
  7
  7
  7
  7
  8
  8
  8
  8
  8
  8
  9
  9
  9
  9
  9
  10
Total operating expenses, $m
  764
  840
  921
  1,005
  1,094
  1,185
  1,280
  1,379
  1,482
  1,589
  1,675
  1,790
  1,911
  2,036
  2,165
  2,300
  2,441
  2,587
  2,741
  2,900
  3,066
  3,240
  3,421
  3,610
  3,808
  4,015
  4,231
  4,457
  4,694
  4,942
Operating income, $m
  83
  95
  107
  120
  134
  148
  163
  178
  194
  210
  252
  270
  289
  308
  328
  349
  370
  393
  416
  441
  466
  493
  521
  550
  581
  612
  646
  681
  717
  755
EBITDA, $m
  134
  149
  164
  180
  197
  214
  232
  251
  270
  290
  311
  333
  356
  379
  404
  429
  456
  484
  513
  543
  574
  607
  641
  677
  714
  754
  794
  837
  882
  929
Interest expense (income), $m
  1
  3
  5
  6
  7
  9
  10
  12
  14
  15
  17
  19
  21
  23
  25
  27
  30
  32
  35
  37
  40
  43
  45
  49
  52
  55
  58
  62
  66
  70
  74
Earnings before tax, $m
  80
  90
  101
  113
  125
  137
  151
  164
  178
  193
  233
  249
  266
  283
  300
  319
  338
  358
  379
  401
  424
  448
  472
  498
  526
  554
  584
  615
  647
  681
Tax expense, $m
  22
  24
  27
  31
  34
  37
  41
  44
  48
  52
  63
  67
  72
  76
  81
  86
  91
  97
  102
  108
  114
  121
  128
  135
  142
  150
  158
  166
  175
  184
Net income, $m
  58
  66
  74
  82
  91
  100
  110
  120
  130
  141
  170
  182
  194
  206
  219
  233
  247
  262
  277
  293
  309
  327
  345
  364
  384
  404
  426
  449
  472
  497

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
  762
  842
  926
  1,013
  1,105
  1,200
  1,299
  1,401
  1,508
  1,619
  1,735
  1,855
  1,979
  2,109
  2,244
  2,384
  2,531
  2,683
  2,842
  3,007
  3,180
  3,360
  3,548
  3,745
  3,950
  4,165
  4,390
  4,625
  4,871
  5,128
Adjusted assets (=assets-cash), $m
  762
  842
  926
  1,013
  1,105
  1,200
  1,299
  1,401
  1,508
  1,619
  1,735
  1,855
  1,979
  2,109
  2,244
  2,384
  2,531
  2,683
  2,842
  3,007
  3,180
  3,360
  3,548
  3,745
  3,950
  4,165
  4,390
  4,625
  4,871
  5,128
Revenue / Adjusted assets
  1.112
  1.112
  1.111
  1.112
  1.110
  1.111
  1.111
  1.111
  1.111
  1.111
  1.111
  1.111
  1.111
  1.111
  1.111
  1.111
  1.111
  1.111
  1.111
  1.111
  1.111
  1.111
  1.111
  1.111
  1.111
  1.111
  1.111
  1.111
  1.111
  1.111
Average production assets, $m
  202
  223
  245
  268
  292
  317
  343
  371
  399
  428
  459
  490
  523
  558
  593
  630
  669
  709
  751
  795
  841
  888
  938
  990
  1,044
  1,101
  1,161
  1,223
  1,288
  1,356
Working capital, $m
  52
  57
  63
  69
  75
  81
  88
  95
  102
  110
  118
  126
  134
  143
  152
  162
  171
  182
  193
  204
  215
  228
  240
  254
  268
  282
  297
  313
  330
  348
Total debt, $m
  86
  111
  137
  164
  193
  222
  253
  286
  319
  354
  390
  427
  467
  507
  549
  593
  639
  687
  736
  788
  842
  899
  957
  1,019
  1,083
  1,151
  1,221
  1,294
  1,371
  1,452
Total liabilities, $m
  239
  264
  290
  317
  346
  376
  406
  439
  472
  507
  543
  581
  620
  660
  702
  746
  792
  840
  889
  941
  995
  1,052
  1,111
  1,172
  1,236
  1,304
  1,374
  1,447
  1,524
  1,605
Total equity, $m
  524
  579
  636
  696
  759
  824
  892
  963
  1,036
  1,113
  1,192
  1,274
  1,360
  1,449
  1,542
  1,638
  1,738
  1,843
  1,952
  2,066
  2,184
  2,308
  2,438
  2,573
  2,714
  2,861
  3,016
  3,177
  3,346
  3,523
Total liabilities and equity, $m
  763
  843
  926
  1,013
  1,105
  1,200
  1,298
  1,402
  1,508
  1,620
  1,735
  1,855
  1,980
  2,109
  2,244
  2,384
  2,530
  2,683
  2,841
  3,007
  3,179
  3,360
  3,549
  3,745
  3,950
  4,165
  4,390
  4,624
  4,870
  5,128
Debt-to-equity ratio
  0.160
  0.190
  0.220
  0.240
  0.250
  0.270
  0.280
  0.300
  0.310
  0.320
  0.330
  0.340
  0.340
  0.350
  0.360
  0.360
  0.370
  0.370
  0.380
  0.380
  0.390
  0.390
  0.390
  0.400
  0.400
  0.400
  0.400
  0.410
  0.410
  0.410
Adjusted equity ratio
  0.687
  0.687
  0.687
  0.687
  0.687
  0.687
  0.687
  0.687
  0.687
  0.687
  0.687
  0.687
  0.687
  0.687
  0.687
  0.687
  0.687
  0.687
  0.687
  0.687
  0.687
  0.687
  0.687
  0.687
  0.687
  0.687
  0.687
  0.687
  0.687
  0.687

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  58
  66
  74
  82
  91
  100
  110
  120
  130
  141
  170
  182
  194
  206
  219
  233
  247
  262
  277
  293
  309
  327
  345
  364
  384
  404
  426
  449
  472
  497
Depreciation, amort., depletion, $m
  51
  54
  57
  60
  63
  66
  69
  73
  76
  80
  59
  63
  67
  71
  76
  81
  86
  91
  96
  102
  108
  114
  120
  127
  134
  141
  149
  157
  165
  174
Funds from operations, $m
  110
  120
  131
  142
  154
  166
  179
  193
  206
  221
  229
  245
  261
  278
  295
  314
  333
  352
  373
  395
  417
  441
  465
  491
  518
  546
  575
  605
  638
  671
Change in working capital, $m
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  17
Cash from operations, $m
  104
  114
  125
  136
  148
  160
  173
  186
  199
  213
  221
  237
  252
  269
  286
  304
  323
  342
  362
  383
  405
  428
  452
  477
  504
  531
  560
  590
  621
  654
Maintenance CAPEX, $m
  -23
  -26
  -29
  -31
  -34
  -37
  -41
  -44
  -48
  -51
  -55
  -59
  -63
  -67
  -71
  -76
  -81
  -86
  -91
  -96
  -102
  -108
  -114
  -120
  -127
  -134
  -141
  -149
  -157
  -165
New CAPEX, $m
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -33
  -34
  -36
  -37
  -39
  -40
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -57
  -59
  -62
  -65
  -68
Cash from investing activities, $m
  -43
  -47
  -51
  -54
  -58
  -62
  -67
  -71
  -76
  -80
  -86
  -91
  -96
  -101
  -107
  -113
  -120
  -126
  -133
  -140
  -148
  -156
  -164
  -172
  -181
  -191
  -200
  -211
  -222
  -233
Free cash flow, $m
  61
  68
  74
  82
  89
  97
  106
  114
  123
  133
  136
  146
  157
  168
  179
  191
  203
  216
  229
  243
  258
  273
  289
  305
  322
  340
  359
  379
  399
  420
Issuance/(repayment) of debt, $m
  24
  25
  26
  27
  29
  30
  31
  32
  33
  35
  36
  38
  39
  41
  42
  44
  46
  48
  50
  52
  54
  56
  59
  62
  64
  67
  70
  74
  77
  81
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
  29
  30
  31
  32
  33
  35
  36
  38
  39
  41
  42
  44
  46
  48
  50
  52
  54
  56
  59
  62
  64
  67
  70
  74
  77
  81
Total cash flow (excl. dividends), $m
  85
  93
  101
  109
  118
  127
  137
  147
  157
  168
  172
  184
  196
  208
  221
  235
  249
  264
  279
  295
  312
  329
  348
  367
  387
  407
  429
  452
  476
  501
Retained Cash Flow (-), $m
  -52
  -55
  -58
  -60
  -63
  -65
  -68
  -71
  -73
  -76
  -79
  -82
  -86
  -89
  -93
  -96
  -100
  -105
  -109
  -114
  -119
  -124
  -129
  -135
  -141
  -148
  -154
  -161
  -169
  -177
Prev. year cash balance distribution, $m
  129
  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
  161
  38
  43
  49
  55
  62
  69
  76
  84
  91
  93
  101
  110
  119
  129
  138
  149
  159
  170
  181
  193
  206
  218
  232
  245
  260
  275
  291
  307
  324
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
  155
  34
  38
  40
  43
  45
  46
  47
  48
  48
  44
  43
  42
  40
  38
  35
  32
  29
  26
  23
  20
  17
  14
  12
  10
  8
  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 31.7
Price to Sales 2.9
Price to Book 3.7
Price to Tangible Book
Price to Cash Flow 19.7
Price to Free Cash Flow 26.6
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 $762.31 million for the last fiscal year's total revenue generated by ExlService Holdings. The default revenue input number comes from 0001 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 89.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $5 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 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 23.8%.

Life of production assets of 7.8 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 6.1%. 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 - $599.821 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 34.313 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: 3Q Earnings Snapshot   [06:11AM  Associated Press]
▶ EXL Reports 2018 Third Quarter Results   [06:00AM  GlobeNewswire]
▶ EXL joins the Blockchain in Transportation Alliance (BiTA)   [Oct-08-18 08:30AM  GlobeNewswire]
▶ 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]

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