Intrinsic value of Hackett Group - HCKT

Previous Close

$18.74

  Intrinsic Value

$13.95

stock screener

  Rating & Target

sell

-26%

Previous close

$18.74

 
Intrinsic value

$13.95

 
Up/down potential

-26%

 
Rating

sell

We calculate the intrinsic value of HCKT 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 0.6

 

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, %
  2.80
  3.02
  3.22
  3.40
  3.56
  3.70
  3.83
  3.95
  4.05
  4.15
  4.23
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.63
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.82
  4.84
  4.86
  4.87
  4.88
  4.90
Revenue, $m
  294
  303
  312
  323
  335
  347
  360
  374
  390
  406
  423
  441
  461
  481
  503
  525
  550
  575
  602
  630
  660
  691
  725
  759
  796
  835
  875
  918
  963
  1,010
Variable operating expenses, $m
  259
  266
  275
  284
  293
  304
  315
  327
  340
  354
  360
  376
  392
  409
  428
  447
  468
  490
  512
  536
  562
  589
  617
  646
  678
  710
  745
  781
  819
  859
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
  259
  266
  275
  284
  293
  304
  315
  327
  340
  354
  360
  376
  392
  409
  428
  447
  468
  490
  512
  536
  562
  589
  617
  646
  678
  710
  745
  781
  819
  859
Operating income, $m
  35
  37
  38
  40
  41
  43
  45
  47
  49
  52
  63
  66
  69
  72
  75
  78
  82
  86
  90
  94
  98
  103
  108
  113
  118
  124
  130
  137
  143
  150
EBITDA, $m
  46
  48
  49
  51
  53
  55
  57
  59
  62
  64
  67
  70
  73
  76
  79
  83
  87
  91
  95
  100
  104
  109
  115
  120
  126
  132
  138
  145
  152
  160
Interest expense (income), $m
  0
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  7
  8
  9
  9
  10
  10
  11
Earnings before tax, $m
  34
  35
  37
  38
  40
  41
  43
  45
  47
  49
  60
  63
  65
  68
  71
  74
  77
  81
  84
  88
  92
  96
  101
  105
  110
  116
  121
  127
  133
  139
Tax expense, $m
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  33
  34
  36
  38
Net income, $m
  25
  26
  27
  28
  29
  30
  32
  33
  34
  36
  44
  46
  48
  50
  52
  54
  56
  59
  62
  64
  67
  70
  74
  77
  81
  84
  88
  93
  97
  102

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
  190
  196
  202
  209
  217
  225
  233
  243
  252
  263
  274
  286
  298
  312
  326
  340
  356
  372
  390
  408
  428
  448
  469
  492
  516
  541
  567
  594
  623
  654
Adjusted assets (=assets-cash), $m
  190
  196
  202
  209
  217
  225
  233
  243
  252
  263
  274
  286
  298
  312
  326
  340
  356
  372
  390
  408
  428
  448
  469
  492
  516
  541
  567
  594
  623
  654
Revenue / Adjusted assets
  1.547
  1.546
  1.545
  1.545
  1.544
  1.542
  1.545
  1.539
  1.548
  1.544
  1.544
  1.542
  1.547
  1.542
  1.543
  1.544
  1.545
  1.546
  1.544
  1.544
  1.542
  1.542
  1.546
  1.543
  1.543
  1.543
  1.543
  1.545
  1.546
  1.544
Average production assets, $m
  58
  59
  61
  63
  66
  68
  71
  73
  76
  80
  83
  86
  90
  94
  99
  103
  108
  113
  118
  124
  129
  136
  142
  149
  156
  164
  172
  180
  189
  198
Working capital, $m
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
Total debt, $m
  21
  24
  26
  29
  32
  36
  39
  43
  47
  52
  56
  61
  67
  72
  78
  84
  91
  98
  105
  113
  121
  130
  139
  148
  158
  169
  180
  191
  204
  216
Total liabilities, $m
  80
  83
  85
  88
  91
  95
  98
  102
  106
  111
  115
  120
  126
  131
  137
  143
  150
  157
  164
  172
  180
  189
  198
  207
  217
  228
  239
  250
  262
  275
Total equity, $m
  110
  114
  117
  121
  125
  130
  135
  140
  146
  152
  159
  165
  173
  180
  188
  197
  206
  216
  226
  236
  248
  259
  272
  285
  299
  313
  328
  344
  361
  379
Total liabilities and equity, $m
  190
  197
  202
  209
  216
  225
  233
  242
  252
  263
  274
  285
  299
  311
  325
  340
  356
  373
  390
  408
  428
  448
  470
  492
  516
  541
  567
  594
  623
  654
Debt-to-equity ratio
  0.190
  0.210
  0.220
  0.240
  0.260
  0.270
  0.290
  0.310
  0.320
  0.340
  0.360
  0.370
  0.390
  0.400
  0.410
  0.430
  0.440
  0.450
  0.470
  0.480
  0.490
  0.500
  0.510
  0.520
  0.530
  0.540
  0.550
  0.560
  0.560
  0.570
Adjusted equity ratio
  0.579
  0.579
  0.579
  0.579
  0.579
  0.579
  0.579
  0.579
  0.579
  0.579
  0.579
  0.579
  0.579
  0.579
  0.579
  0.579
  0.579
  0.579
  0.579
  0.579
  0.579
  0.579
  0.579
  0.579
  0.579
  0.579
  0.579
  0.579
  0.579
  0.579

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  25
  26
  27
  28
  29
  30
  32
  33
  34
  36
  44
  46
  48
  50
  52
  54
  56
  59
  62
  64
  67
  70
  74
  77
  81
  84
  88
  93
  97
  102
Depreciation, amort., depletion, $m
  11
  11
  11
  12
  12
  12
  12
  12
  12
  12
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
Funds from operations, $m
  36
  37
  38
  39
  41
  42
  43
  45
  47
  48
  48
  50
  52
  54
  56
  59
  61
  64
  67
  70
  73
  77
  80
  84
  88
  92
  97
  101
  106
  111
Change in working capital, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
Cash from operations, $m
  36
  37
  38
  39
  40
  42
  43
  45
  46
  48
  47
  49
  51
  54
  56
  58
  61
  64
  67
  70
  73
  76
  80
  83
  87
  91
  96
  100
  105
  110
Maintenance CAPEX, $m
  -3
  -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
  -1
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
Cash from investing activities, $m
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -8
  -9
  -10
  -10
  -10
  -12
  -12
  -12
  -12
  -14
  -14
  -15
  -16
  -16
  -18
  -18
Free cash flow, $m
  32
  32
  33
  34
  35
  36
  37
  38
  40
  41
  40
  42
  44
  45
  47
  49
  51
  54
  56
  58
  61
  64
  67
  70
  73
  76
  80
  84
  88
  92
Issuance/(repayment) of debt, $m
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
  10
  11
  11
  12
  12
  13
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  
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
  10
  11
  11
  12
  12
  13
Total cash flow (excl. dividends), $m
  34
  35
  36
  37
  38
  39
  41
  42
  44
  46
  45
  47
  49
  51
  53
  55
  58
  60
  63
  66
  69
  72
  76
  79
  83
  87
  91
  95
  100
  105
Retained Cash Flow (-), $m
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
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
  31
  32
  32
  33
  34
  35
  36
  37
  38
  39
  39
  40
  42
  43
  45
  47
  49
  51
  53
  55
  58
  61
  63
  66
  69
  72
  76
  79
  83
  87
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
  30
  29
  28
  27
  26
  25
  24
  23
  22
  21
  18
  17
  16
  15
  13
  12
  11
  9
  8
  7
  6
  5
  4
  3
  3
  2
  2
  1
  1
  1
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

The Hackett Group, Inc. is an advisory and technology consulting company. The Company's services include business transformation, enterprise performance management, working capital management and global business services. The Company is engaged in providing business and technology consulting services. It focuses on business strategy, operations, finance, human capital management, strategic sourcing, procurement, and information technology, including Oracle Enterprise Performance Management (EPM) and SAP practices. It offers a range of services, including executive advisory programs, benchmarking, business transformation and technology consulting services. Its advisory programs include a mix of the deliverables, such as Best Practice Intelligence Center, Best Practice Accelerators, Advisor Inquiry, Best Practice Research and Peer Interaction. Its Business Transformation programs help clients develop a coordinated strategy for achieving performance improvements across the enterprise.

FINANCIAL RATIOS  of  Hackett Group (HCKT)

Valuation Ratios
P/E Ratio 24.4
Price to Sales 1.9
Price to Book 6.2
Price to Tangible Book
Price to Cash Flow 16.2
Price to Free Cash Flow 17.9
Growth Rates
Sales Growth Rate 10.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate 8.4%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 8.1%
Total Debt to Equity 8.1%
Interest Coverage 0
Management Effectiveness
Return On Assets 13.8%
Ret/ On Assets - 3 Yr. Avg. 10%
Return On Total Capital 22.6%
Ret/ On T. Cap. - 3 Yr. Avg. 15%
Return On Equity 23.4%
Return On Equity - 3 Yr. Avg. 16.3%
Asset Turnover 1.8
Profitability Ratios
Gross Margin 33.2%
Gross Margin - 3 Yr. Avg. 32.1%
EBITDA Margin 12.8%
EBITDA Margin - 3 Yr. Avg. 10.1%
Operating Margin 12.1%
Oper. Margin - 3 Yr. Avg. 8.7%
Pre-Tax Margin 11.8%
Pre-Tax Margin - 3 Yr. Avg. 8.4%
Net Profit Margin 7.6%
Net Profit Margin - 3 Yr. Avg. 5.7%
Effective Tax Rate 35.3%
Eff/ Tax Rate - 3 Yr. Avg. 29.4%
Payout Ratio 31.8%

HCKT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HCKT stock intrinsic value calculation we used $285.862 million for the last fiscal year's total revenue generated by Hackett Group. The default revenue input number comes from 0001 income statement of Hackett Group. 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 HCKT stock valuation model: a) initial revenue growth rate of 2.8% 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 HCKT is calculated based on our internal credit rating of Hackett Group, 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 Hackett Group.
    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 HCKT stock the variable cost ratio is equal to 88.1%.

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 HCKT 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 Hackett Group.

Corporate tax rate of 27% is the nominal tax rate for Hackett Group. 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 HCKT 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 HCKT are equal to 19.6%.

Life of production assets of 21.1 years is the average useful life of capital assets used in Hackett Group 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 HCKT is equal to 2.2%. 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 - $107.275 million for Hackett Group - 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 29.462 million for Hackett Group 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 Hackett Group at the current share price and the inputted number of shares is $0.6 billion.

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COMPANY NEWS

▶ Hackett Group (HCKT) Q3 Earnings Meet Estimates   [Nov-06-18 06:00PM  Zacks]
▶ Hackett Group: 3Q Earnings Snapshot   [04:57PM  Associated Press]
▶ Hackett Group: 2Q Earnings Snapshot   [06:28PM  Associated Press]
▶ Hackett: U.S. Cos. Improve Working Capital Performance   [Jul-19-18 10:00AM  Business Wire]
▶ [$$] Delaying Payments to Suppliers Helps Companies Unlock Cash   [Jun-28-18 06:07AM  The Wall Street Journal]
▶ Hackett Group: 1Q Earnings Snapshot   [May-09-18 05:13AM  Associated Press]
▶ The Hackett Group Announces First Quarter 2018 Results   [May-08-18 04:29PM  Business Wire]
▶ Why The Hackett Group Inc (NASDAQ:HCKT) Could Be A Buy   [Apr-17-18 07:49PM  Simply Wall St.]
▶ Hackett Group tops Street 4Q forecasts   [Feb-20-18 04:25PM  Associated Press]
▶ Hackett Group Q4 Earnings Preview   [10:56AM  Benzinga]
▶ Southwest Airlines settles dispute over fired mechanics backpay   [Feb-09-18 01:25PM  American City Business Journals]
▶ Hackett Group Higher On Midday Upgrade   [Nov-09-17 03:43PM  Benzinga]
▶ Hackett Group tops Street 3Q forecasts   [Nov-07-17 06:21PM  Associated Press]
▶ [$$] Companies Leave Bean Counting to the Robots   [Oct-23-17 12:03AM  The Wall Street Journal]
▶ [$$] Companies Leave Bean Counting to the Robots   [Oct-19-17 06:00AM  The Wall Street Journal]
▶ These are the highest-paid tech executives in South Florida   [Oct-04-17 02:20PM  American City Business Journals]
▶ The Hackett Group and ADP Expand Strategic Alliance   [Aug-21-17 09:30AM  Business Wire]
▶ [$$] CFOs Want to Free up Working Capital   [07:00AM  The Wall Street Journal]
▶ [$$] Hackett Plans Heavy Investments With His New Oklahoma Shale Play   [Aug-17-17 05:20PM  The Wall Street Journal]
▶ The Hackett Group Achieves Oracle Cloud Premier Status   [Aug-15-17 09:30AM  Business Wire]
▶ Hackett Group meets 2Q profit forecasts   [Aug-08-17 11:45PM  Associated Press]
▶ [$$] Jim Hackett, Ford's philosopher-in-chief   [May-26-17 07:40AM  Financial Times]

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