Intrinsic value of Hackett Group - HCKT

Previous Close

$16.29

  Intrinsic Value

$18.02

stock screener

  Rating & Target

hold

+11%

Previous close

$16.29

 
Intrinsic value

$18.02

 
Up/down potential

+11%

 
Rating

hold

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

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.

Please visit our new site that uses elements of artificial intelligence for stock valuation: artificial intelligence value of Hackett Group (HCKT) stock.

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, %
  10.73
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  289
  295
  302
  309
  318
  328
  338
  350
  362
  376
  390
  405
  422
  439
  458
  478
  499
  521
  544
  569
  595
  623
  652
  683
  715
  749
  785
  823
  862
  904
  948
Variable operating expenses, $m
 
  158
  161
  165
  170
  175
  180
  186
  192
  199
  207
  207
  216
  225
  234
  244
  255
  266
  278
  291
  304
  318
  333
  349
  365
  383
  401
  420
  441
  462
  485
Fixed operating expenses, $m
 
  104
  106
  109
  111
  114
  117
  120
  123
  126
  129
  133
  136
  139
  143
  146
  150
  154
  158
  161
  166
  170
  174
  178
  183
  187
  192
  197
  202
  207
  212
Total operating expenses, $m
  254
  262
  267
  274
  281
  289
  297
  306
  315
  325
  336
  340
  352
  364
  377
  390
  405
  420
  436
  452
  470
  488
  507
  527
  548
  570
  593
  617
  643
  669
  697
Operating income, $m
  35
  33
  34
  35
  37
  39
  41
  44
  47
  50
  54
  66
  70
  76
  81
  87
  94
  101
  109
  117
  126
  135
  145
  156
  167
  179
  192
  205
  220
  235
  252
EBITDA, $m
  38
  41
  42
  43
  45
  47
  49
  52
  55
  58
  62
  67
  71
  77
  82
  88
  95
  102
  110
  118
  127
  136
  146
  157
  168
  180
  193
  207
  222
  237
  254
Interest expense (income), $m
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
Earnings before tax, $m
  34
  33
  34
  35
  36
  38
  40
  43
  46
  49
  53
  65
  69
  74
  80
  86
  92
  99
  106
  114
  123
  132
  142
  152
  163
  175
  188
  201
  215
  230
  246
Tax expense, $m
  12
  9
  9
  9
  10
  10
  11
  12
  12
  13
  14
  17
  19
  20
  22
  23
  25
  27
  29
  31
  33
  36
  38
  41
  44
  47
  51
  54
  58
  62
  66
Net income, $m
  22
  24
  25
  25
  27
  28
  30
  31
  34
  36
  39
  47
  51
  54
  58
  62
  67
  72
  78
  83
  90
  96
  103
  111
  119
  128
  137
  147
  157
  168
  180

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  20
  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
  159
  142
  145
  149
  153
  158
  163
  168
  174
  181
  188
  195
  203
  211
  220
  230
  240
  251
  262
  274
  286
  300
  314
  328
  344
  360
  378
  396
  415
  435
  456
Adjusted assets (=assets-cash), $m
  139
  142
  145
  149
  153
  158
  163
  168
  174
  181
  188
  195
  203
  211
  220
  230
  240
  251
  262
  274
  286
  300
  314
  328
  344
  360
  378
  396
  415
  435
  456
Revenue / Adjusted assets
  2.079
  2.077
  2.083
  2.074
  2.078
  2.076
  2.074
  2.083
  2.080
  2.077
  2.074
  2.077
  2.079
  2.081
  2.082
  2.078
  2.079
  2.076
  2.076
  2.077
  2.080
  2.077
  2.076
  2.082
  2.078
  2.081
  2.077
  2.078
  2.077
  2.078
  2.079
Average production assets, $m
  18
  18
  18
  19
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  35
  36
  38
  40
  42
  44
  46
  48
  50
  53
  55
  58
Working capital, $m
  13
  -7
  -7
  -7
  -8
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -11
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
Total debt, $m
  7
  8
  10
  12
  14
  17
  19
  22
  25
  29
  33
  36
  41
  45
  50
  55
  60
  66
  71
  78
  84
  91
  99
  106
  115
  123
  132
  142
  152
  162
  173
Total liabilities, $m
  73
  74
  76
  78
  80
  83
  85
  88
  91
  95
  99
  102
  107
  111
  116
  121
  126
  132
  137
  144
  150
  157
  165
  172
  181
  189
  198
  208
  218
  228
  239
Total equity, $m
  86
  67
  69
  71
  73
  75
  77
  80
  83
  86
  89
  93
  96
  100
  105
  109
  114
  119
  124
  130
  136
  142
  149
  156
  163
  171
  179
  188
  197
  207
  217
Total liabilities and equity, $m
  159
  141
  145
  149
  153
  158
  162
  168
  174
  181
  188
  195
  203
  211
  221
  230
  240
  251
  261
  274
  286
  299
  314
  328
  344
  360
  377
  396
  415
  435
  456
Debt-to-equity ratio
  0.081
  0.130
  0.150
  0.170
  0.200
  0.220
  0.250
  0.280
  0.310
  0.340
  0.360
  0.390
  0.420
  0.450
  0.470
  0.500
  0.530
  0.550
  0.570
  0.600
  0.620
  0.640
  0.660
  0.680
  0.700
  0.720
  0.740
  0.750
  0.770
  0.790
  0.800
Adjusted equity ratio
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  22
  24
  25
  25
  27
  28
  30
  31
  34
  36
  39
  47
  51
  54
  58
  62
  67
  72
  78
  83
  90
  96
  103
  111
  119
  128
  137
  147
  157
  168
  180
Depreciation, amort., depletion, $m
  3
  8
  8
  8
  8
  8
  8
  8
  8
  8
  8
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
Funds from operations, $m
  30
  32
  33
  33
  34
  36
  37
  39
  42
  44
  47
  48
  51
  55
  59
  63
  68
  73
  79
  85
  91
  98
  105
  112
  121
  129
  138
  148
  159
  170
  181
Change in working capital, $m
  -3
  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
  33
  32
  33
  33
  35
  36
  38
  40
  42
  44
  47
  48
  52
  55
  60
  64
  69
  74
  79
  85
  92
  98
  105
  113
  121
  130
  139
  149
  160
  171
  183
Maintenance CAPEX, $m
  0
  -1
  -1
  -1
  -1
  -1
  -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
New CAPEX, $m
  -3
  0
  0
  0
  -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
  -3
  -3
Cash from investing activities, $m
  -3
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
Free cash flow, $m
  30
  31
  32
  32
  33
  35
  36
  38
  40
  43
  46
  47
  50
  54
  58
  62
  66
  71
  77
  83
  89
  95
  102
  110
  118
  127
  136
  145
  156
  166
  178
Issuance/(repayment) of debt, $m
  7
  1
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
Issuance/(repurchase) of shares, $m
  -33
  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  
  -27
  1
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
Total cash flow (excl. dividends), $m
  3
  33
  33
  34
  36
  37
  39
  41
  44
  46
  49
  51
  54
  58
  62
  67
  72
  77
  83
  89
  95
  102
  110
  118
  126
  135
  145
  155
  166
  177
  189
Retained Cash Flow (-), $m
  16
  -1
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
Prev. year cash balance distribution, $m
 
  20
  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
 
  51
  32
  33
  34
  35
  37
  39
  41
  43
  46
  47
  50
  54
  58
  62
  67
  72
  77
  83
  89
  96
  103
  111
  119
  127
  136
  146
  157
  167
  179
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
 
  49
  29
  28
  28
  27
  27
  26
  25
  25
  24
  22
  21
  21
  19
  18
  17
  16
  14
  13
  11
  10
  9
  7
  6
  5
  4
  3
  2
  2
  1
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

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 21.2
Price to Sales 1.6
Price to Book 5.4
Price to Tangible Book
Price to Cash Flow 14.1
Price to Free Cash Flow 15.5
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 $289 million for the last fiscal year's total revenue generated by Hackett Group. The default revenue input number comes from 2016 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% 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 53.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $101 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 3.5% 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 6.1%.

Life of production assets of 30.3 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 -2.4%. 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 - $86 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 28.511 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 $0.5 billion.

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COMPANY NEWS

▶ 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]
▶ Hackett Group meets 1Q profit forecasts   [May-09-17 07:22PM  Associated Press]
▶ Top Ranked Growth Stocks to Buy for March 1st   [Mar-01-17 09:52AM  Zacks]
Financial statements of HCKT
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