Intrinsic value of Forrester Research - FORR

Previous Close

$45.60

  Intrinsic Value

$58.45

stock screener

  Rating & Target

buy

+28%

Previous close

$45.60

 
Intrinsic value

$58.45

 
Up/down potential

+28%

 
Rating

buy

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of FORR 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   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

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  3.82
  3.90
  4.01
  4.11
  4.20
  4.28
  4.35
  4.42
  4.47
  4.53
  4.57
  4.62
  4.65
  4.69
  4.72
  4.75
  4.77
  4.80
  4.82
  4.83
  4.85
  4.87
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
  4.95
Revenue, $m
  326
  339
  352
  367
  382
  399
  416
  434
  454
  474
  496
  519
  543
  568
  595
  623
  653
  685
  718
  752
  789
  827
  867
  910
  954
  1,001
  1,051
  1,102
  1,157
  1,214
  1,274
Variable operating expenses, $m
 
  63
  65
  68
  70
  73
  76
  79
  82
  85
  89
  85
  89
  94
  98
  103
  108
  113
  118
  124
  130
  136
  143
  150
  157
  165
  173
  181
  190
  200
  210
Fixed operating expenses, $m
 
  248
  254
  261
  267
  274
  281
  288
  295
  302
  310
  318
  325
  334
  342
  350
  359
  368
  377
  387
  397
  406
  417
  427
  438
  449
  460
  471
  483
  495
  508
Total operating expenses, $m
  295
  311
  319
  329
  337
  347
  357
  367
  377
  387
  399
  403
  414
  428
  440
  453
  467
  481
  495
  511
  527
  542
  560
  577
  595
  614
  633
  652
  673
  695
  718
Operating income, $m
  31
  28
  33
  38
  45
  52
  59
  68
  77
  87
  97
  116
  128
  141
  155
  170
  186
  204
  222
  242
  262
  284
  308
  333
  360
  388
  418
  450
  483
  519
  557
EBITDA, $m
  40
  37
  43
  49
  55
  62
  70
  78
  87
  97
  108
  120
  132
  145
  160
  175
  191
  209
  227
  247
  268
  291
  314
  340
  367
  395
  426
  458
  492
  528
  566
Interest expense (income), $m
  0
  0
  0
  0
  1
  1
  1
  1
  2
  2
  3
  3
  3
  4
  4
  5
  5
  6
  7
  7
  8
  9
  9
  10
  11
  12
  13
  14
  15
  16
  17
Earnings before tax, $m
  31
  28
  33
  38
  44
  51
  58
  66
  75
  84
  95
  113
  125
  137
  151
  165
  181
  198
  215
  234
  254
  276
  299
  323
  349
  376
  405
  436
  469
  503
  540
Tax expense, $m
  13
  7
  9
  10
  12
  14
  16
  18
  20
  23
  26
  30
  34
  37
  41
  45
  49
  53
  58
  63
  69
  74
  81
  87
  94
  102
  109
  118
  127
  136
  146
Net income, $m
  18
  20
  24
  28
  32
  37
  43
  48
  55
  62
  69
  82
  91
  100
  110
  121
  132
  144
  157
  171
  186
  201
  218
  236
  255
  275
  296
  318
  342
  367
  394

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  138
  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
  336
  206
  214
  223
  232
  242
  253
  264
  276
  288
  301
  315
  330
  345
  362
  379
  397
  416
  436
  457
  479
  502
  527
  553
  580
  608
  638
  670
  703
  738
  774
Adjusted assets (=assets-cash), $m
  198
  206
  214
  223
  232
  242
  253
  264
  276
  288
  301
  315
  330
  345
  362
  379
  397
  416
  436
  457
  479
  502
  527
  553
  580
  608
  638
  670
  703
  738
  774
Revenue / Adjusted assets
  1.646
  1.646
  1.645
  1.646
  1.647
  1.649
  1.644
  1.644
  1.645
  1.646
  1.648
  1.648
  1.645
  1.646
  1.644
  1.644
  1.645
  1.647
  1.647
  1.646
  1.647
  1.647
  1.645
  1.646
  1.645
  1.646
  1.647
  1.645
  1.646
  1.645
  1.646
Average production assets, $m
  27
  28
  29
  30
  32
  33
  35
  36
  38
  39
  41
  43
  45
  47
  49
  52
  54
  57
  60
  62
  65
  69
  72
  76
  79
  83
  87
  92
  96
  101
  106
Working capital, $m
  46
  -96
  -99
  -103
  -108
  -112
  -117
  -122
  -128
  -134
  -140
  -146
  -153
  -160
  -168
  -176
  -184
  -193
  -202
  -212
  -222
  -233
  -245
  -257
  -269
  -282
  -296
  -311
  -326
  -342
  -359
Total debt, $m
  0
  -1
  7
  15
  23
  32
  41
  51
  62
  73
  85
  98
  111
  125
  139
  155
  171
  188
  206
  225
  245
  266
  288
  312
  336
  362
  388
  417
  447
  478
  511
Total liabilities, $m
  186
  185
  193
  201
  209
  218
  227
  237
  248
  259
  271
  284
  297
  311
  325
  341
  357
  374
  392
  411
  431
  452
  474
  498
  522
  548
  574
  603
  633
  664
  697
Total equity, $m
  150
  21
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
  36
  38
  40
  42
  44
  46
  48
  50
  53
  55
  58
  61
  64
  67
  70
  74
  77
Total liabilities and equity, $m
  336
  206
  214
  223
  232
  242
  252
  263
  276
  288
  301
  316
  330
  346
  361
  379
  397
  416
  436
  457
  479
  502
  527
  553
  580
  609
  638
  670
  703
  738
  774
Debt-to-equity ratio
  0.000
  -0.040
  0.310
  0.650
  0.990
  1.320
  1.640
  1.950
  2.250
  2.540
  2.830
  3.100
  3.360
  3.610
  3.860
  4.090
  4.310
  4.530
  4.730
  4.930
  5.120
  5.300
  5.470
  5.640
  5.790
  5.940
  6.090
  6.220
  6.350
  6.480
  6.600
Adjusted equity ratio
  0.061
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  18
  20
  24
  28
  32
  37
  43
  48
  55
  62
  69
  82
  91
  100
  110
  121
  132
  144
  157
  171
  186
  201
  218
  236
  255
  275
  296
  318
  342
  367
  394
Depreciation, amort., depletion, $m
  9
  10
  10
  10
  10
  10
  10
  11
  11
  11
  11
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
Funds from operations, $m
  46
  30
  34
  38
  42
  47
  53
  59
  65
  72
  80
  86
  95
  104
  115
  125
  137
  149
  163
  177
  192
  208
  224
  243
  262
  282
  304
  326
  351
  376
  404
Change in working capital, $m
  4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
Cash from operations, $m
  42
  34
  38
  42
  47
  52
  58
  64
  71
  78
  86
  93
  102
  112
  122
  133
  145
  158
  172
  186
  202
  218
  236
  254
  274
  295
  317
  341
  366
  393
  421
Maintenance CAPEX, $m
  0
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
New CAPEX, $m
  -4
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
Cash from investing activities, $m
  -18
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -6
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -11
  -11
  -11
  -12
  -13
  -14
  -14
Free cash flow, $m
  24
  30
  34
  38
  43
  48
  53
  60
  66
  73
  81
  87
  96
  106
  116
  127
  138
  151
  164
  178
  193
  209
  226
  245
  264
  284
  306
  329
  353
  379
  407
Issuance/(repayment) of debt, $m
  0
  -1
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
  30
  31
  33
Issuance/(repurchase) of shares, $m
  15
  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  
  16
  -1
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
  30
  31
  33
Total cash flow (excl. dividends), $m
  37
  29
  41
  46
  51
  57
  63
  70
  77
  84
  93
  100
  109
  119
  130
  142
  155
  168
  182
  197
  213
  230
  248
  268
  288
  310
  333
  357
  383
  410
  439
Retained Cash Flow (-), $m
  -23
  -9
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
Prev. year cash balance distribution, $m
 
  138
  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
 
  159
  41
  45
  50
  56
  62
  68
  76
  83
  91
  98
  108
  118
  129
  140
  153
  166
  180
  195
  211
  228
  246
  265
  285
  307
  330
  354
  380
  407
  436
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
 
  152
  37
  39
  41
  43
  45
  46
  47
  48
  48
  47
  46
  45
  43
  41
  39
  36
  33
  30
  27
  24
  20
  17
  15
  12
  10
  8
  6
  4
  3
Current shareholders' claim on cash, %
  100
  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

Forrester Research, Inc. (Forrester) is an independent research, data, and advisory services firm. The Company offers research, data, advisory and related services that are thematic, prescriptive and executable, and that provide a perspective on the changing business environment. Its segments include Research, Product and Project Consulting. The Research segment is responsible for writing the research and performing the Webinars and inquiries for its Research and Connect products. The Product segment includes the product management organization that is responsible for product pricing and packaging and the launch of new products. In addition, this segment includes its Data, Connect and Events organizations. The Project Consulting segment offers project consulting services. Its products and services are categorized into Forrester Research, Forrester Connect, Forrester Data, Forrester Consulting and Forrester Events.

FINANCIAL RATIOS  of  Forrester Research (FORR)

Valuation Ratios
P/E Ratio 46.5
Price to Sales 2.6
Price to Book 5.6
Price to Tangible Book
Price to Cash Flow 19.9
Price to Free Cash Flow 22
Growth Rates
Sales Growth Rate 3.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate 5.9%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 5.5%
Ret/ On Assets - 3 Yr. Avg. 4.1%
Return On Total Capital 13%
Ret/ On T. Cap. - 3 Yr. Avg. 9.4%
Return On Equity 13%
Return On Equity - 3 Yr. Avg. 9.4%
Asset Turnover 1
Profitability Ratios
Gross Margin 60.7%
Gross Margin - 3 Yr. Avg. 60%
EBITDA Margin 12.3%
EBITDA Margin - 3 Yr. Avg. 10.2%
Operating Margin 9.5%
Oper. Margin - 3 Yr. Avg. 7.1%
Pre-Tax Margin 9.5%
Pre-Tax Margin - 3 Yr. Avg. 7.1%
Net Profit Margin 5.5%
Net Profit Margin - 3 Yr. Avg. 4.3%
Effective Tax Rate 41.9%
Eff/ Tax Rate - 3 Yr. Avg. 39.2%
Payout Ratio 72.2%

FORR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FORR stock intrinsic value calculation we used $326 million for the last fiscal year's total revenue generated by Forrester Research. The default revenue input number comes from 2016 income statement of Forrester Research. 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 FORR stock valuation model: a) initial revenue growth rate of 3.9% 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 FORR is calculated based on our internal credit rating of Forrester Research, 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 Forrester Research.
    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 FORR stock the variable cost ratio is equal to 18.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $242 million in the base year in the intrinsic value calculation for FORR 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 3.5% for Forrester Research.

Corporate tax rate of 27% is the nominal tax rate for Forrester Research. 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 FORR 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 FORR are equal to 8.3%.

Life of production assets of 11.2 years is the average useful life of capital assets used in Forrester Research 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 FORR is equal to -28.2%. 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 - $150 million for Forrester Research - 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 18.138 million for Forrester Research 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 Forrester Research at the current share price and the inputted number of shares is $0.8 billion.

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COMPANY NEWS

▶ Forrester Releases 2018 Predictions   [Nov-13-17 08:00PM  PR Newswire]
▶ Forrester Releases 2018 Predictions   [Nov-06-17 10:46AM  PR Newswire]
▶ Forrester Analyst Says iPhone X Demand Remains Strong   [Nov-02-17 05:48PM  Bloomberg Video]
▶ Forrester Research posts 3Q profit   [Oct-25-17 06:07PM  Associated Press]
▶ [$$] Forrester Hack Shows Criminals Turning Their Sights on Data   [Oct-10-17 07:12AM  The Wall Street Journal]
▶ Forrester website hacked for financial research   [Oct-06-17 06:56PM  MarketWatch]
▶ Forrester Launches Tap   [10:47AM  PR Newswire]
▶ Forrester's Ask Says Consumers Will Like iPhone X Camera   [Sep-12-17 05:35PM  Bloomberg Video]
▶ Forrester Analyst Says Time to 'Up the Ante' on iPhone   [Sep-01-17 03:31PM  Bloomberg Video]
▶ Forrester Research posts 2Q profit   [Jul-26-17 11:04PM  Associated Press]
▶ Forrester Research Names New Chief Sales Officer   [Jul-11-17 04:05PM  PR Newswire]
▶ Is Your Job Safe From the Rise of the Robots?   [Jun-04-17 09:24AM  Motley Fool]
▶ Forrester Research Names New Board Members   [May-31-17 04:05PM  PR Newswire]
▶ Dissecting Amazon's 1st-Qtr Earnings and Global Strategy   [Apr-27-17 07:12PM  Bloomberg Video]
▶ Full Show: Bloomberg Technology (04/26)   [Apr-26-17 08:36PM  Bloomberg]
▶ Forrester Research posts 1Q profit   [06:14PM  Associated Press]
▶ Marketers' Adoption of Virtual Reality Still Years Away   [Feb-13-17 06:15PM  The Wall Street Journal]
▶ Forrester Research posts 4Q profit   [05:51PM  Associated Press]
▶ Publicly traded company announces new Nashville office, 120 jobs   [Jan-25-17 01:28PM  at bizjournals.com]
Financial statements of FORR
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