Intrinsic value of The Hackett Group, Inc. - HCKT

Previous Close

$16.80

  Intrinsic Value

$26.51

stock screener

  Rating & Target

str. buy

+58%

Previous close

$16.80

 
Intrinsic value

$26.51

 
Up/down potential

+58%

 
Rating

str. buy

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 0.5

 

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, %
  5.90
  5.81
  5.73
  5.66
  5.59
  5.53
  5.48
  5.43
  5.39
  5.35
  5.31
  5.28
  5.25
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
  5.06
  5.06
  5.05
  5.05
  5.04
Revenue, $m
  303
  320
  339
  358
  378
  399
  421
  444
  468
  493
  519
  546
  575
  605
  636
  669
  704
  740
  778
  818
  860
  904
  950
  998
  1,048
  1,102
  1,157
  1,216
  1,277
  1,342
Variable operating expenses, $m
  142
  149
  157
  166
  175
  184
  193
  203
  214
  225
  228
  240
  253
  266
  280
  294
  309
  325
  342
  360
  378
  397
  417
  439
  461
  484
  509
  534
  561
  590
Fixed operating expenses, $m
  124
  126
  129
  132
  135
  138
  141
  144
  147
  150
  154
  157
  161
  164
  168
  171
  175
  179
  183
  187
  191
  195
  200
  204
  208
  213
  218
  223
  227
  232
Total operating expenses, $m
  266
  275
  286
  298
  310
  322
  334
  347
  361
  375
  382
  397
  414
  430
  448
  465
  484
  504
  525
  547
  569
  592
  617
  643
  669
  697
  727
  757
  788
  822
Operating income, $m
  38
  45
  52
  60
  69
  77
  86
  96
  106
  117
  137
  149
  162
  175
  189
  204
  219
  236
  253
  271
  291
  311
  333
  355
  379
  404
  431
  459
  488
  519
EBITDA, $m
  49
  56
  64
  72
  81
  90
  99
  109
  119
  131
  142
  154
  167
  181
  195
  210
  226
  243
  261
  280
  299
  320
  342
  365
  390
  415
  442
  471
  501
  533
Interest expense (income), $m
  0
  0
  1
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
Earnings before tax, $m
  37
  44
  52
  59
  67
  76
  85
  94
  104
  115
  134
  146
  158
  171
  185
  200
  215
  231
  248
  266
  285
  305
  326
  348
  371
  396
  422
  449
  478
  508
Tax expense, $m
  10
  12
  14
  16
  18
  20
  23
  25
  28
  31
  36
  39
  43
  46
  50
  54
  58
  62
  67
  72
  77
  82
  88
  94
  100
  107
  114
  121
  129
  137
Net income, $m
  27
  32
  38
  43
  49
  55
  62
  69
  76
  84
  98
  107
  116
  125
  135
  146
  157
  169
  181
  194
  208
  222
  238
  254
  271
  289
  308
  328
  349
  371

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
  191
  203
  214
  226
  239
  252
  266
  280
  296
  311
  328
  345
  363
  382
  402
  423
  445
  468
  492
  517
  544
  571
  600
  631
  663
  696
  732
  769
  807
  848
Adjusted assets (=assets-cash), $m
  191
  203
  214
  226
  239
  252
  266
  280
  296
  311
  328
  345
  363
  382
  402
  423
  445
  468
  492
  517
  544
  571
  600
  631
  663
  696
  732
  769
  807
  848
Revenue / Adjusted assets
  1.586
  1.576
  1.584
  1.584
  1.582
  1.583
  1.583
  1.586
  1.581
  1.585
  1.582
  1.583
  1.584
  1.584
  1.582
  1.582
  1.582
  1.581
  1.581
  1.582
  1.581
  1.583
  1.583
  1.582
  1.581
  1.583
  1.581
  1.581
  1.582
  1.583
Average production assets, $m
  65
  69
  73
  77
  81
  86
  90
  95
  101
  106
  112
  117
  124
  130
  137
  144
  151
  159
  167
  176
  185
  194
  204
  215
  225
  237
  249
  261
  275
  288
Working capital, $m
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  27
  29
  30
  32
  34
  35
  37
  39
  41
  43
  46
  48
  50
  53
  56
  58
  61
  64
  68
  71
Total debt, $m
  10
  13
  17
  21
  25
  29
  33
  38
  43
  48
  53
  58
  64
  70
  76
  83
  90
  97
  105
  113
  121
  130
  139
  149
  159
  169
  181
  192
  204
  217
Total liabilities, $m
  60
  64
  68
  72
  76
  80
  84
  89
  93
  98
  104
  109
  115
  121
  127
  134
  141
  148
  155
  163
  172
  181
  190
  199
  209
  220
  231
  243
  255
  268
Total equity, $m
  131
  139
  146
  155
  163
  172
  182
  192
  202
  213
  224
  236
  249
  262
  275
  289
  304
  320
  336
  354
  372
  391
  411
  431
  453
  476
  500
  526
  552
  580
Total liabilities and equity, $m
  191
  203
  214
  227
  239
  252
  266
  281
  295
  311
  328
  345
  364
  383
  402
  423
  445
  468
  491
  517
  544
  572
  601
  630
  662
  696
  731
  769
  807
  848
Debt-to-equity ratio
  0.080
  0.100
  0.120
  0.130
  0.150
  0.170
  0.180
  0.200
  0.210
  0.220
  0.240
  0.250
  0.260
  0.270
  0.280
  0.290
  0.300
  0.300
  0.310
  0.320
  0.330
  0.330
  0.340
  0.340
  0.350
  0.360
  0.360
  0.370
  0.370
  0.370
Adjusted equity ratio
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  27
  32
  38
  43
  49
  55
  62
  69
  76
  84
  98
  107
  116
  125
  135
  146
  157
  169
  181
  194
  208
  222
  238
  254
  271
  289
  308
  328
  349
  371
Depreciation, amort., depletion, $m
  11
  12
  12
  12
  12
  12
  13
  13
  13
  13
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  12
  12
  13
  13
Funds from operations, $m
  39
  44
  49
  55
  61
  68
  75
  82
  89
  97
  103
  112
  121
  131
  141
  152
  164
  176
  189
  202
  216
  231
  247
  264
  281
  300
  319
  340
  362
  384
Change in working capital, $m
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
Cash from operations, $m
  38
  43
  48
  54
  60
  67
  73
  81
  88
  96
  102
  111
  120
  130
  140
  151
  162
  174
  187
  200
  214
  229
  245
  261
  279
  297
  316
  337
  358
  381
Maintenance CAPEX, $m
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
New CAPEX, $m
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
Cash from investing activities, $m
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -11
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -17
  -17
  -18
  -19
  -19
  -21
  -21
  -23
  -25
  -25
  -27
Free cash flow, $m
  31
  36
  41
  47
  52
  58
  65
  71
  78
  86
  91
  100
  108
  117
  127
  137
  148
  159
  171
  184
  197
  211
  226
  241
  258
  275
  293
  313
  333
  354
Issuance/(repayment) of debt, $m
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  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  
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
Total cash flow (excl. dividends), $m
  35
  40
  45
  51
  56
  63
  69
  76
  83
  91
  97
  105
  114
  123
  133
  144
  155
  166
  179
  192
  205
  220
  235
  251
  268
  286
  305
  324
  345
  367
Retained Cash Flow (-), $m
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
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
  27
  32
  37
  42
  48
  54
  60
  66
  73
  80
  85
  93
  102
  110
  120
  129
  140
  151
  162
  174
  187
  201
  215
  230
  246
  263
  280
  299
  319
  339
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
  26
  29
  32
  35
  37
  39
  40
  41
  42
  42
  40
  40
  39
  37
  35
  33
  30
  28
  25
  22
  19
  17
  14
  12
  10
  8
  6
  5
  3
  3
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  The Hackett Group, Inc. (HCKT)

Valuation Ratios
P/E Ratio 21.8
Price to Sales 1.7
Price to Book 5.6
Price to Tangible Book
Price to Cash Flow 14.6
Price to Free Cash Flow 16
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 $286 million for the last fiscal year's total revenue generated by The Hackett Group, Inc.. The default revenue input number comes from 0001 income statement of The Hackett Group, Inc.. 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 5.9% 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 HCKT is calculated based on our internal credit rating of The Hackett Group, Inc., 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 The Hackett Group, Inc..
    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 46.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $121 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 The Hackett Group, Inc..

Corporate tax rate of 27% is the nominal tax rate for The Hackett Group, Inc.. 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 21.5%.

Life of production assets of 21.5 years is the average useful life of capital assets used in The Hackett Group, Inc. 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 5.3%. 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 - $123.59 million for The Hackett Group, Inc. - 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 29.969 million for The Hackett Group, Inc. 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 The Hackett Group, Inc. at the current share price and the inputted number of shares is $0.5 billion.

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