Intrinsic value of HFF Cl A - HF

Previous Close

$38.00

  Intrinsic Value

$62.66

stock screener

  Rating & Target

str. buy

+65%

Previous close

$38.00

 
Intrinsic value

$62.66

 
Up/down potential

+65%

 
Rating

str. buy

Our model is not good at valuating stocks of financial companies, such as HF.

We calculate the intrinsic value of HF 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 1.5

 

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, %
  11.90
  11.21
  10.59
  10.03
  9.53
  9.07
  8.67
  8.30
  7.97
  7.67
  7.41
  7.17
  6.95
  6.75
  6.58
  6.42
  6.28
  6.15
  6.04
  5.93
  5.84
  5.75
  5.68
  5.61
  5.55
  5.50
  5.45
  5.40
  5.36
  5.32
Revenue, $m
  682
  758
  839
  923
  1,011
  1,103
  1,198
  1,298
  1,401
  1,508
  1,620
  1,736
  1,857
  1,982
  2,113
  2,248
  2,390
  2,537
  2,690
  2,849
  3,016
  3,189
  3,370
  3,559
  3,757
  3,963
  4,179
  4,405
  4,641
  4,888
Variable operating expenses, $m
  542
  602
  665
  731
  800
  872
  947
  1,025
  1,106
  1,191
  1,272
  1,363
  1,458
  1,556
  1,658
  1,765
  1,876
  1,991
  2,111
  2,236
  2,367
  2,503
  2,645
  2,794
  2,949
  3,111
  3,280
  3,458
  3,643
  3,837
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
  542
  602
  665
  731
  800
  872
  947
  1,025
  1,106
  1,191
  1,272
  1,363
  1,458
  1,556
  1,658
  1,765
  1,876
  1,991
  2,111
  2,236
  2,367
  2,503
  2,645
  2,794
  2,949
  3,111
  3,280
  3,458
  3,643
  3,837
Operating income, $m
  140
  156
  174
  192
  211
  230
  251
  272
  295
  318
  348
  373
  399
  426
  454
  484
  514
  546
  578
  613
  649
  686
  725
  766
  808
  852
  899
  947
  998
  1,051
EBITDA, $m
  157
  174
  192
  212
  232
  253
  275
  298
  321
  346
  372
  398
  426
  455
  485
  516
  548
  582
  617
  654
  692
  732
  773
  817
  862
  910
  959
  1,011
  1,065
  1,122
Interest expense (income), $m
  9
  24
  25
  26
  27
  29
  30
  31
  32
  34
  35
  37
  38
  40
  42
  43
  45
  47
  49
  51
  53
  55
  57
  60
  62
  65
  68
  71
  73
  77
  80
Earnings before tax, $m
  116
  131
  147
  164
  182
  201
  220
  240
  261
  282
  312
  335
  360
  385
  411
  439
  467
  497
  528
  560
  593
  628
  665
  703
  743
  785
  828
  874
  922
  972
Tax expense, $m
  31
  35
  40
  44
  49
  54
  59
  65
  70
  76
  84
  91
  97
  104
  111
  118
  126
  134
  142
  151
  160
  170
  180
  190
  201
  212
  224
  236
  249
  262
Net income, $m
  84
  96
  107
  120
  133
  146
  160
  175
  190
  206
  228
  245
  262
  281
  300
  320
  341
  363
  385
  409
  433
  459
  485
  513
  542
  573
  605
  638
  673
  709

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
  289
  321
  355
  391
  428
  467
  507
  549
  593
  639
  686
  735
  786
  839
  894
  952
  1,012
  1,074
  1,139
  1,206
  1,277
  1,350
  1,427
  1,507
  1,591
  1,678
  1,769
  1,865
  1,965
  2,070
Adjusted assets (=assets-cash), $m
  289
  321
  355
  391
  428
  467
  507
  549
  593
  639
  686
  735
  786
  839
  894
  952
  1,012
  1,074
  1,139
  1,206
  1,277
  1,350
  1,427
  1,507
  1,591
  1,678
  1,769
  1,865
  1,965
  2,070
Revenue / Adjusted assets
  2.360
  2.361
  2.363
  2.361
  2.362
  2.362
  2.363
  2.364
  2.363
  2.360
  2.362
  2.362
  2.363
  2.362
  2.364
  2.361
  2.362
  2.362
  2.362
  2.362
  2.362
  2.362
  2.362
  2.362
  2.361
  2.362
  2.362
  2.362
  2.362
  2.361
Average production assets, $m
  49
  55
  60
  66
  73
  79
  86
  93
  101
  109
  117
  125
  134
  143
  152
  162
  172
  183
  194
  205
  217
  230
  243
  256
  270
  285
  301
  317
  334
  352
Working capital, $m
  -83
  -92
  -101
  -112
  -122
  -133
  -145
  -157
  -170
  -183
  -196
  -210
  -225
  -240
  -256
  -272
  -289
  -307
  -325
  -345
  -365
  -386
  -408
  -431
  -455
  -480
  -506
  -533
  -562
  -591
Total debt, $m
  469
  489
  509
  531
  553
  576
  601
  626
  653
  680
  708
  738
  769
  801
  834
  868
  904
  942
  981
  1,022
  1,064
  1,108
  1,154
  1,203
  1,253
  1,306
  1,361
  1,418
  1,478
  1,541
Total liabilities, $m
  174
  193
  214
  235
  258
  281
  305
  331
  357
  384
  413
  443
  473
  505
  538
  573
  609
  646
  686
  726
  769
  813
  859
  907
  958
  1,010
  1,065
  1,123
  1,183
  1,246
Total equity, $m
  115
  128
  141
  156
  170
  186
  202
  219
  236
  254
  273
  293
  313
  334
  356
  379
  403
  427
  453
  480
  508
  537
  568
  600
  633
  668
  704
  742
  782
  824
Total liabilities and equity, $m
  289
  321
  355
  391
  428
  467
  507
  550
  593
  638
  686
  736
  786
  839
  894
  952
  1,012
  1,073
  1,139
  1,206
  1,277
  1,350
  1,427
  1,507
  1,591
  1,678
  1,769
  1,865
  1,965
  2,070
Debt-to-equity ratio
  4.080
  3.820
  3.600
  3.410
  3.250
  3.100
  2.980
  2.860
  2.760
  2.670
  2.590
  2.520
  2.460
  2.400
  2.340
  2.290
  2.250
  2.200
  2.160
  2.130
  2.090
  2.060
  2.030
  2.010
  1.980
  1.950
  1.930
  1.910
  1.890
  1.870
Adjusted equity ratio
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  84
  96
  107
  120
  133
  146
  160
  175
  190
  206
  228
  245
  262
  281
  300
  320
  341
  363
  385
  409
  433
  459
  485
  513
  542
  573
  605
  638
  673
  709
Depreciation, amort., depletion, $m
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  23
  25
  27
  29
  30
  32
  34
  37
  39
  41
  43
  46
  49
  51
  54
  57
  60
  63
  67
  70
Funds from operations, $m
  101
  113
  126
  140
  154
  169
  184
  201
  217
  235
  251
  270
  289
  309
  331
  353
  375
  399
  424
  450
  477
  505
  534
  565
  597
  630
  665
  701
  740
  780
Change in working capital, $m
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
Cash from operations, $m
  110
  123
  136
  150
  165
  180
  196
  213
  230
  248
  264
  284
  304
  325
  346
  369
  392
  417
  442
  469
  497
  526
  556
  587
  620
  655
  691
  729
  768
  810
Maintenance CAPEX, $m
  -9
  -10
  -11
  -12
  -13
  -15
  -16
  -17
  -19
  -20
  -22
  -23
  -25
  -27
  -29
  -30
  -32
  -34
  -37
  -39
  -41
  -43
  -46
  -49
  -51
  -54
  -57
  -60
  -63
  -67
New CAPEX, $m
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
Cash from investing activities, $m
  -14
  -16
  -17
  -18
  -19
  -22
  -23
  -24
  -26
  -28
  -30
  -31
  -34
  -36
  -38
  -40
  -42
  -45
  -48
  -50
  -53
  -55
  -59
  -63
  -65
  -69
  -73
  -76
  -80
  -85
Free cash flow, $m
  96
  107
  119
  132
  145
  159
  173
  188
  204
  220
  235
  252
  270
  289
  308
  329
  350
  372
  395
  419
  444
  470
  497
  525
  555
  586
  618
  652
  688
  725
Issuance/(repayment) of debt, $m
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  33
  35
  36
  37
  39
  41
  42
  44
  46
  48
  50
  53
  55
  58
  60
  63
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  
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  33
  35
  36
  37
  39
  41
  42
  44
  46
  48
  50
  53
  55
  58
  60
  63
Total cash flow (excl. dividends), $m
  114
  127
  140
  153
  168
  182
  198
  214
  230
  247
  263
  282
  301
  321
  342
  363
  386
  409
  434
  459
  486
  514
  543
  574
  605
  639
  673
  710
  748
  788
Retained Cash Flow (-), $m
  -12
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -33
  -35
  -36
  -38
  -40
  -42
Prev. year cash balance distribution, $m
  184
  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
  286
  114
  126
  139
  153
  167
  182
  197
  213
  229
  244
  262
  281
  300
  320
  340
  362
  385
  408
  433
  458
  485
  513
  542
  572
  604
  637
  672
  708
  746
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
  274
  104
  110
  115
  118
  121
  123
  123
  122
  120
  116
  112
  107
  101
  94
  87
  79
  71
  63
  55
  47
  40
  34
  28
  22
  18
  14
  10
  8
  6
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
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HFF, Inc. is a holding company. The Company holds the partnership interests in Holliday Fenoglio Fowler, L.P. and HFF Securities L.P. (together, the Operating Partnerships), held through the subsidiary HFF Partnership Holdings, LLC, and all of the outstanding shares of Holliday GP Corp. (Holliday GP). The Company operates through the commercial real estate financial intermediary segment. It offers debt placement, investment sales, distressed debt and real estate owned advisory services, equity placement, investment banking and advisory services, loan sales and commercial loan servicing. Its fully-integrated national capital markets platform, coupled with its knowledge of the commercial real estate markets provides an range of capital markets services, including Debt placement; Investment sales; Distressed debt and real estate owned advisory services; Equity placement; Investment banking and advisory services; Loan sales; and Commercial loan servicing.

FINANCIAL RATIOS  of  HFF Cl A (HF)

Valuation Ratios
P/E Ratio 18.8
Price to Sales 2.8
Price to Book 6.1
Price to Tangible Book
Price to Cash Flow 18.3
Price to Free Cash Flow 19.6
Growth Rates
Sales Growth Rate 3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -16.7%
Cap. Spend. - 3 Yr. Gr. Rate 10.8%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 0.4%
Total Debt to Equity 123.2%
Interest Coverage 15
Management Effectiveness
Return On Assets 11.3%
Ret/ On Assets - 3 Yr. Avg. 11.9%
Return On Total Capital 14.5%
Ret/ On T. Cap. - 3 Yr. Avg. 17.3%
Return On Equity 34.1%
Return On Equity - 3 Yr. Avg. 36.6%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 43.7%
Gross Margin - 3 Yr. Avg. 43.6%
EBITDA Margin 28.8%
EBITDA Margin - 3 Yr. Avg. 29%
Operating Margin 18.4%
Oper. Margin - 3 Yr. Avg. 19.9%
Pre-Tax Margin 24.8%
Pre-Tax Margin - 3 Yr. Avg. 25.8%
Net Profit Margin 14.9%
Net Profit Margin - 3 Yr. Avg. 15.3%
Effective Tax Rate 39.8%
Eff/ Tax Rate - 3 Yr. Avg. 40.7%
Payout Ratio 88.3%

HF stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HF stock intrinsic value calculation we used $609.478 million for the last fiscal year's total revenue generated by HFF Cl A. The default revenue input number comes from 0001 income statement of HFF Cl A. 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 HF stock valuation model: a) initial revenue growth rate of 11.9% 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 HF is calculated based on our internal credit rating of HFF Cl A, 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 HFF Cl A.
    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 HF stock the variable cost ratio is equal to 79.6%.

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 HF 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 HFF Cl A.

Corporate tax rate of 27% is the nominal tax rate for HFF Cl A. 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 HF 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 HF are equal to 7.2%.

Life of production assets of 0 years is the average useful life of capital assets used in HFF Cl A 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 HF is equal to -12.1%. 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 - $286.467 million for HFF Cl A - 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 39.116 million for HFF Cl A 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 HFF Cl A at the current share price and the inputted number of shares is $1.5 billion.

RELATED COMPANIES Price Int.Val. Rating
MMI Marcus&Millich 37.38 50.46  buy

COMPANY NEWS

▶ HFF: 3Q Earnings Snapshot   [05:37PM  Associated Press]
▶ Downtown Orlando's (retail) shopping list: 9 things business people want here   [Oct-18-18 02:27PM  American City Business Journals]
▶ Four Seasons targets downtown Nashville skyscraper   [Oct-11-18 04:56PM  American City Business Journals]
▶ Alexandria live-work building being offered for sale   [Sep-20-18 04:50PM  American City Business Journals]
▶ HFF Announces Sale of High-Rise Apartments in Uptown Denver   [Sep-04-18 04:20PM  Business Wire]
▶ HFF Announces Sale of The Lex in Chicagos South Loop   [Aug-27-18 06:20AM  Business Wire]
▶ Here are the Houston stocks driving Wall Street's latest bull run   [06:00AM  American City Business Journals]
▶ Chinese, Chicago investors offer downtown tower for sale   [Aug-22-18 12:50PM  American City Business Journals]
▶ What Is HFF Incs (NYSE:HF) Share Price Doing?   [Aug-17-18 11:34AM  Simply Wall St.]
▶ Washington Harbour has a new owner, and he's bullish on the D.C. area   [02:55PM  American City Business Journals]
▶ HFF Announces Sale of Burnham Pointe in Chicago   [Jul-18-18 04:17PM  Business Wire]
▶ Exclusive: Buyer emerges for Washington Harbour   [Jun-22-18 02:43PM  American City Business Journals]
▶ Price tag swells as 40-story tower plans advance   [Jun-06-18 02:22PM  American City Business Journals]
▶ HFF Announces $640M Sale of 5 Bryant Park in Manhattan   [May-25-18 04:17PM  Business Wire]
▶ Industrial park in southwest Houston trades hands   [01:24PM  American City Business Journals]
▶ HFF: 1Q Earnings Snapshot   [05:09AM  Associated Press]
▶ HFF Announces Sale and Financing of Optima Chicago Center   [Apr-17-18 04:23PM  Business Wire]
▶ 2 industrial properties totaling 550,000 SF trade hands in NW Houston   [Apr-05-18 01:23PM  American City Business Journals]

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