Intrinsic value of FTI Consulting - FCN

Previous Close

$63.09

  Intrinsic Value

$68.35

stock screener

  Rating & Target

hold

+8%

Previous close

$63.09

 
Intrinsic value

$68.35

 
Up/down potential

+8%

 
Rating

hold

We calculate the intrinsic value of FCN 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 2.4

 

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, %
  15.20
  14.18
  13.26
  12.44
  11.69
  11.02
  10.42
  9.88
  9.39
  8.95
  8.56
  8.20
  7.88
  7.59
  7.33
  7.10
  6.89
  6.70
  6.53
  6.38
  6.24
  6.12
  6.00
  5.90
  5.81
  5.73
  5.66
  5.59
  5.53
  5.48
Revenue, $m
  2,083
  2,378
  2,693
  3,028
  3,382
  3,755
  4,146
  4,556
  4,984
  5,430
  5,894
  6,378
  6,880
  7,403
  7,946
  8,510
  9,096
  9,706
  10,340
  10,999
  11,685
  12,400
  13,145
  13,921
  14,730
  15,574
  16,456
  17,376
  18,338
  19,342
Variable operating expenses, $m
  1,899
  2,151
  2,419
  2,705
  3,006
  3,324
  3,657
  4,006
  4,371
  4,751
  5,021
  5,433
  5,861
  6,306
  6,769
  7,250
  7,749
  8,268
  8,808
  9,370
  9,955
  10,564
  11,198
  11,859
  12,549
  13,268
  14,019
  14,803
  15,622
  16,478
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
  1,899
  2,151
  2,419
  2,705
  3,006
  3,324
  3,657
  4,006
  4,371
  4,751
  5,021
  5,433
  5,861
  6,306
  6,769
  7,250
  7,749
  8,268
  8,808
  9,370
  9,955
  10,564
  11,198
  11,859
  12,549
  13,268
  14,019
  14,803
  15,622
  16,478
Operating income, $m
  184
  227
  274
  324
  376
  431
  489
  550
  613
  679
  873
  944
  1,019
  1,096
  1,177
  1,260
  1,347
  1,437
  1,531
  1,629
  1,730
  1,836
  1,947
  2,061
  2,181
  2,306
  2,437
  2,573
  2,716
  2,864
EBITDA, $m
  335
  382
  433
  487
  544
  604
  667
  733
  801
  873
  948
  1,025
  1,106
  1,190
  1,278
  1,368
  1,463
  1,561
  1,662
  1,769
  1,879
  1,994
  2,114
  2,238
  2,368
  2,504
  2,646
  2,794
  2,948
  3,110
Interest expense (income), $m
  23
  27
  37
  49
  62
  75
  89
  103
  119
  135
  152
  170
  188
  207
  227
  247
  269
  291
  314
  338
  363
  389
  417
  445
  474
  505
  537
  570
  605
  641
  679
Earnings before tax, $m
  157
  190
  225
  262
  301
  342
  386
  431
  478
  527
  703
  757
  812
  869
  929
  991
  1,056
  1,123
  1,193
  1,265
  1,341
  1,420
  1,502
  1,587
  1,677
  1,770
  1,867
  1,968
  2,074
  2,185
Tax expense, $m
  42
  51
  61
  71
  81
  92
  104
  116
  129
  142
  190
  204
  219
  235
  251
  268
  285
  303
  322
  342
  362
  383
  405
  429
  453
  478
  504
  531
  560
  590
Net income, $m
  115
  139
  164
  191
  220
  250
  282
  315
  349
  385
  513
  552
  593
  635
  678
  724
  771
  820
  871
  924
  979
  1,036
  1,096
  1,159
  1,224
  1,292
  1,363
  1,437
  1,514
  1,595

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
  2,600
  2,969
  3,362
  3,780
  4,222
  4,688
  5,176
  5,688
  6,222
  6,779
  7,359
  7,962
  8,590
  9,242
  9,920
  10,624
  11,356
  12,117
  12,908
  13,732
  14,588
  15,481
  16,410
  17,379
  18,389
  19,443
  20,544
  21,693
  22,893
  24,148
Adjusted assets (=assets-cash), $m
  2,600
  2,969
  3,362
  3,780
  4,222
  4,688
  5,176
  5,688
  6,222
  6,779
  7,359
  7,962
  8,590
  9,242
  9,920
  10,624
  11,356
  12,117
  12,908
  13,732
  14,588
  15,481
  16,410
  17,379
  18,389
  19,443
  20,544
  21,693
  22,893
  24,148
Revenue / Adjusted assets
  0.801
  0.801
  0.801
  0.801
  0.801
  0.801
  0.801
  0.801
  0.801
  0.801
  0.801
  0.801
  0.801
  0.801
  0.801
  0.801
  0.801
  0.801
  0.801
  0.801
  0.801
  0.801
  0.801
  0.801
  0.801
  0.801
  0.801
  0.801
  0.801
  0.801
Average production assets, $m
  793
  906
  1,026
  1,154
  1,289
  1,431
  1,580
  1,736
  1,899
  2,069
  2,246
  2,430
  2,621
  2,820
  3,027
  3,242
  3,466
  3,698
  3,939
  4,191
  4,452
  4,724
  5,008
  5,304
  5,612
  5,934
  6,270
  6,620
  6,987
  7,369
Working capital, $m
  194
  221
  250
  282
  315
  349
  386
  424
  463
  505
  548
  593
  640
  688
  739
  791
  846
  903
  962
  1,023
  1,087
  1,153
  1,222
  1,295
  1,370
  1,448
  1,530
  1,616
  1,705
  1,799
Total debt, $m
  558
  732
  918
  1,115
  1,324
  1,544
  1,774
  2,016
  2,268
  2,531
  2,804
  3,089
  3,385
  3,693
  4,013
  4,346
  4,691
  5,050
  5,424
  5,812
  6,217
  6,638
  7,077
  7,534
  8,011
  8,508
  9,028
  9,570
  10,137
  10,729
Total liabilities, $m
  1,227
  1,401
  1,587
  1,784
  1,993
  2,213
  2,443
  2,685
  2,937
  3,200
  3,473
  3,758
  4,054
  4,362
  4,682
  5,014
  5,360
  5,719
  6,093
  6,481
  6,886
  7,307
  7,746
  8,203
  8,680
  9,177
  9,697
  10,239
  10,806
  11,398
Total equity, $m
  1,373
  1,567
  1,775
  1,996
  2,229
  2,475
  2,733
  3,003
  3,285
  3,579
  3,885
  4,204
  4,535
  4,880
  5,238
  5,609
  5,996
  6,398
  6,816
  7,250
  7,703
  8,174
  8,665
  9,176
  9,710
  10,266
  10,847
  11,454
  12,088
  12,750
Total liabilities and equity, $m
  2,600
  2,968
  3,362
  3,780
  4,222
  4,688
  5,176
  5,688
  6,222
  6,779
  7,358
  7,962
  8,589
  9,242
  9,920
  10,623
  11,356
  12,117
  12,909
  13,731
  14,589
  15,481
  16,411
  17,379
  18,390
  19,443
  20,544
  21,693
  22,894
  24,148
Debt-to-equity ratio
  0.410
  0.470
  0.520
  0.560
  0.590
  0.620
  0.650
  0.670
  0.690
  0.710
  0.720
  0.730
  0.750
  0.760
  0.770
  0.770
  0.780
  0.790
  0.800
  0.800
  0.810
  0.810
  0.820
  0.820
  0.830
  0.830
  0.830
  0.840
  0.840
  0.840
Adjusted equity ratio
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  115
  139
  164
  191
  220
  250
  282
  315
  349
  385
  513
  552
  593
  635
  678
  724
  771
  820
  871
  924
  979
  1,036
  1,096
  1,159
  1,224
  1,292
  1,363
  1,437
  1,514
  1,595
Depreciation, amort., depletion, $m
  151
  155
  159
  163
  168
  173
  178
  183
  188
  194
  75
  81
  87
  94
  101
  108
  116
  123
  131
  140
  148
  157
  167
  177
  187
  198
  209
  221
  233
  246
Funds from operations, $m
  266
  294
  323
  355
  388
  423
  459
  497
  537
  579
  588
  633
  680
  729
  779
  832
  886
  943
  1,002
  1,063
  1,127
  1,194
  1,263
  1,336
  1,411
  1,490
  1,572
  1,658
  1,747
  1,841
Change in working capital, $m
  26
  27
  29
  31
  33
  35
  36
  38
  40
  41
  43
  45
  47
  49
  50
  52
  55
  57
  59
  61
  64
  66
  69
  72
  75
  79
  82
  86
  89
  93
Cash from operations, $m
  240
  266
  294
  323
  355
  388
  423
  459
  497
  537
  545
  588
  633
  680
  729
  779
  832
  886
  943
  1,002
  1,064
  1,127
  1,194
  1,263
  1,336
  1,411
  1,490
  1,572
  1,658
  1,747
Maintenance CAPEX, $m
  -23
  -26
  -30
  -34
  -38
  -43
  -48
  -53
  -58
  -63
  -69
  -75
  -81
  -87
  -94
  -101
  -108
  -116
  -123
  -131
  -140
  -148
  -157
  -167
  -177
  -187
  -198
  -209
  -221
  -233
New CAPEX, $m
  -105
  -113
  -120
  -128
  -135
  -142
  -149
  -156
  -163
  -170
  -177
  -184
  -191
  -199
  -207
  -215
  -223
  -232
  -242
  -251
  -261
  -272
  -284
  -296
  -308
  -322
  -336
  -351
  -366
  -383
Cash from investing activities, $m
  -128
  -139
  -150
  -162
  -173
  -185
  -197
  -209
  -221
  -233
  -246
  -259
  -272
  -286
  -301
  -316
  -331
  -348
  -365
  -382
  -401
  -420
  -441
  -463
  -485
  -509
  -534
  -560
  -587
  -616
Free cash flow, $m
  113
  127
  144
  162
  181
  203
  226
  251
  277
  304
  299
  329
  361
  394
  428
  463
  500
  539
  578
  620
  662
  707
  753
  801
  851
  902
  956
  1,012
  1,071
  1,132
Issuance/(repayment) of debt, $m
  162
  174
  186
  197
  209
  220
  231
  241
  252
  263
  274
  285
  296
  308
  320
  332
  346
  359
  374
  389
  404
  421
  439
  457
  477
  498
  519
  542
  567
  592
Issuance/(repurchase) of shares, $m
  66
  56
  44
  29
  13
  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  
  228
  230
  230
  226
  222
  220
  231
  241
  252
  263
  274
  285
  296
  308
  320
  332
  346
  359
  374
  389
  404
  421
  439
  457
  477
  498
  519
  542
  567
  592
Total cash flow (excl. dividends), $m
  341
  357
  373
  389
  404
  423
  457
  492
  529
  567
  573
  614
  657
  702
  748
  796
  846
  898
  952
  1,008
  1,067
  1,128
  1,192
  1,258
  1,327
  1,400
  1,476
  1,555
  1,637
  1,724
Retained Cash Flow (-), $m
  -181
  -195
  -208
  -221
  -233
  -246
  -258
  -270
  -282
  -294
  -306
  -319
  -331
  -344
  -358
  -372
  -386
  -402
  -418
  -435
  -452
  -471
  -491
  -512
  -533
  -557
  -581
  -607
  -634
  -662
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
  160
  163
  165
  168
  170
  177
  199
  222
  247
  273
  267
  296
  326
  357
  390
  424
  459
  496
  534
  573
  614
  657
  701
  747
  794
  843
  895
  948
  1,004
  1,061
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
  153
  149
  144
  138
  132
  128
  134
  139
  142
  143
  127
  126
  124
  120
  114
  108
  100
  91
  82
  73
  64
  54
  46
  38
  31
  25
  19
  15
  11
  8
Current shareholders' claim on cash, %
  97.3
  95.4
  94.1
  93.3
  93.0
  93.0
  93.0
  93.0
  93.0
  93.0
  93.0
  93.0
  93.0
  93.0
  93.0
  93.0
  93.0
  93.0
  93.0
  93.0
  93.0
  93.0
  93.0
  93.0
  93.0
  93.0
  93.0
  93.0
  93.0
  93.0

FTI Consulting, Inc. is a business advisory company. The Company operates through five segments: Corporate Finance & Restructuring, Forensic and Litigation Consulting, Economic Consulting, Technology and Strategic Communications. The Company provides advice and services, such as restructuring (including bankruptcy), capital formation and indebtedness, interim business management, performance improvements, forensic accounting and litigation matters, international arbitrations, mergers and acquisitions (M&A), antitrust and competition matters, securities litigation, electronic discovery (or e-discovery), management and retrieval of electronically stored information (ESI), reputation management and strategic communications. The Company collaborates with Chief Financial Officers (CFOs) and their finance and accounting organizations and uses engagement tools to provide transformation services, manage risk, deliver business intelligence capabilities, and prepare for and execute events.

FINANCIAL RATIOS  of  FTI Consulting (FCN)

Valuation Ratios
P/E Ratio 30.8
Price to Sales 1.5
Price to Book 2.2
Price to Tangible Book
Price to Cash Flow 11.4
Price to Free Cash Flow 13
Growth Rates
Sales Growth Rate 1.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -6.5%
Cap. Spend. - 3 Yr. Gr. Rate -7.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 30.3%
Total Debt to Equity 30.3%
Interest Coverage 7
Management Effectiveness
Return On Assets 4.6%
Ret/ On Assets - 3 Yr. Avg. 4.1%
Return On Total Capital 5.3%
Ret/ On T. Cap. - 3 Yr. Avg. 4.2%
Return On Equity 7.3%
Return On Equity - 3 Yr. Avg. 6.2%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 33.1%
Gross Margin - 3 Yr. Avg. 34%
EBITDA Margin 11%
EBITDA Margin - 3 Yr. Avg. 11.1%
Operating Margin 7.8%
Oper. Margin - 3 Yr. Avg. 8.1%
Pre-Tax Margin 7.1%
Pre-Tax Margin - 3 Yr. Avg. 6.2%
Net Profit Margin 4.8%
Net Profit Margin - 3 Yr. Avg. 3.9%
Effective Tax Rate 32.8%
Eff/ Tax Rate - 3 Yr. Avg. 37.2%
Payout Ratio 0%

FCN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FCN stock intrinsic value calculation we used $1807.732 million for the last fiscal year's total revenue generated by FTI Consulting. The default revenue input number comes from 0001 income statement of FTI Consulting. 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 FCN stock valuation model: a) initial revenue growth rate of 15.2% 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 FCN is calculated based on our internal credit rating of FTI Consulting, 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 FTI Consulting.
    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 FCN stock the variable cost ratio is equal to 92.1%.

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 FCN 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 6.7% for FTI Consulting.

Corporate tax rate of 27% is the nominal tax rate for FTI Consulting. 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 FCN 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 FCN are equal to 38.1%.

Life of production assets of 31.4 years is the average useful life of capital assets used in FTI Consulting 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 FCN is equal to 9.3%. 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 - $1191.971 million for FTI Consulting - 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 38.207 million for FTI Consulting 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 FTI Consulting at the current share price and the inputted number of shares is $2.4 billion.

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COMPANY NEWS

▶ FTI Consulting Releases India Disclosure Index 2018   [Nov-19-18 11:00PM  GlobeNewswire]
▶ FTI Consulting: 3Q Earnings Snapshot   [10:46AM  Associated Press]
▶ Anatomy of Success: FTI Consulting (FCN)   [Oct-08-18 02:07PM  Zacks]
▶ FTI Consulting Releases ASEAN Disclosure Index 2018   [Sep-27-18 01:00AM  GlobeNewswire]
▶ Buy These 5 Low-Beta Stocks to Brave Market Volatility   [Aug-20-18 05:40PM  InvestorPlace]
▶ Seal Legal ForensicsĀ® Joins RingtailĀ® Partner Network   [Aug-09-18 07:30AM  GlobeNewswire]
▶ 5 Best Performing Stocks of July   [Aug-01-18 11:59AM  InvestorPlace]
▶ 5 Best Performing Stocks of July   [08:20AM  Zacks]
▶ FTI Consulting: 2Q Earnings Snapshot   [Jul-26-18 10:29AM  Associated Press]
▶ 5 Stocks in Focus on New Analyst Coverage   [Jul-24-18 01:43PM  InvestorPlace]

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