Intrinsic value of HFF Cl A - HF

Previous Close

$46.51

  Intrinsic Value

$45.41

stock screener

  Rating & Target

hold

-2%

Previous close

$46.51

 
Intrinsic value

$45.41

 
Up/down potential

-2%

 
Rating

hold

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

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

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.

Please visit our new site that uses elements of artificial intelligence for stock valuation: artificial intelligence value of HFF Cl A (HF) 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, %
  2.99
  16.50
  15.35
  14.32
  13.38
  12.55
  11.79
  11.11
  10.50
  9.95
  9.46
  9.01
  8.61
  8.25
  7.92
  7.63
  7.37
  7.13
  6.92
  6.73
  6.55
  6.40
  6.26
  6.13
  6.02
  5.92
  5.83
  5.74
  5.67
  5.60
  5.54
Revenue, $m
  517
  602
  695
  794
  901
  1,013
  1,133
  1,259
  1,391
  1,529
  1,674
  1,825
  1,982
  2,145
  2,315
  2,492
  2,676
  2,867
  3,065
  3,271
  3,485
  3,708
  3,941
  4,182
  4,434
  4,696
  4,970
  5,255
  5,553
  5,864
  6,189
Variable operating expenses, $m
 
  473
  545
  623
  707
  795
  889
  988
  1,091
  1,200
  1,313
  1,431
  1,554
  1,683
  1,816
  1,954
  2,098
  2,248
  2,404
  2,565
  2,733
  2,908
  3,090
  3,280
  3,477
  3,683
  3,897
  4,121
  4,355
  4,599
  4,854
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
  422
  473
  545
  623
  707
  795
  889
  988
  1,091
  1,200
  1,313
  1,431
  1,554
  1,683
  1,816
  1,954
  2,098
  2,248
  2,404
  2,565
  2,733
  2,908
  3,090
  3,280
  3,477
  3,683
  3,897
  4,121
  4,355
  4,599
  4,854
Operating income, $m
  96
  130
  150
  171
  194
  218
  244
  271
  300
  330
  361
  394
  428
  463
  500
  538
  577
  619
  661
  706
  752
  800
  850
  902
  957
  1,013
  1,072
  1,134
  1,198
  1,265
  1,335
EBITDA, $m
  108
  141
  163
  186
  211
  237
  265
  295
  325
  358
  392
  427
  464
  502
  542
  583
  626
  671
  717
  765
  815
  868
  922
  979
  1,037
  1,099
  1,163
  1,230
  1,299
  1,372
  1,448
Interest expense (income), $m
  9
  2
  3
  5
  7
  8
  10
  12
  14
  16
  19
  21
  24
  26
  29
  32
  35
  38
  41
  44
  47
  51
  55
  58
  62
  67
  71
  75
  80
  85
  90
Earnings before tax, $m
  128
  128
  146
  166
  187
  210
  234
  259
  286
  313
  342
  373
  404
  437
  471
  506
  543
  581
  621
  662
  705
  749
  796
  844
  894
  947
  1,001
  1,058
  1,118
  1,180
  1,245
Tax expense, $m
  51
  34
  39
  45
  51
  57
  63
  70
  77
  85
  92
  101
  109
  118
  127
  137
  147
  157
  168
  179
  190
  202
  215
  228
  241
  256
  270
  286
  302
  319
  336
Net income, $m
  77
  93
  107
  121
  137
  153
  171
  189
  208
  229
  250
  272
  295
  319
  344
  369
  396
  424
  453
  483
  514
  547
  581
  616
  653
  691
  731
  773
  816
  862
  909

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  236
  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
  717
  560
  646
  739
  838
  943
  1,054
  1,171
  1,294
  1,423
  1,557
  1,698
  1,844
  1,996
  2,154
  2,318
  2,489
  2,667
  2,851
  3,043
  3,242
  3,450
  3,666
  3,890
  4,125
  4,369
  4,623
  4,889
  5,166
  5,455
  5,757
Adjusted assets (=assets-cash), $m
  481
  560
  646
  739
  838
  943
  1,054
  1,171
  1,294
  1,423
  1,557
  1,698
  1,844
  1,996
  2,154
  2,318
  2,489
  2,667
  2,851
  3,043
  3,242
  3,450
  3,666
  3,890
  4,125
  4,369
  4,623
  4,889
  5,166
  5,455
  5,757
Revenue / Adjusted assets
  1.075
  1.075
  1.076
  1.074
  1.075
  1.074
  1.075
  1.075
  1.075
  1.074
  1.075
  1.075
  1.075
  1.075
  1.075
  1.075
  1.075
  1.075
  1.075
  1.075
  1.075
  1.075
  1.075
  1.075
  1.075
  1.075
  1.075
  1.075
  1.075
  1.075
  1.075
Average production assets, $m
  47
  55
  63
  72
  82
  92
  103
  115
  127
  139
  152
  166
  180
  195
  211
  227
  243
  261
  279
  298
  317
  337
  359
  381
  403
  427
  452
  478
  505
  534
  563
Working capital, $m
  175
  268
  309
  353
  401
  451
  504
  560
  619
  681
  745
  812
  882
  955
  1,030
  1,109
  1,191
  1,276
  1,364
  1,456
  1,551
  1,650
  1,754
  1,861
  1,973
  2,090
  2,212
  2,339
  2,471
  2,610
  2,754
Total debt, $m
  292
  96
  140
  187
  237
  290
  346
  406
  468
  533
  602
  673
  747
  824
  904
  987
  1,074
  1,164
  1,257
  1,355
  1,456
  1,561
  1,670
  1,784
  1,903
  2,027
  2,156
  2,291
  2,431
  2,578
  2,731
Total liabilities, $m
  480
  284
  328
  375
  425
  478
  534
  594
  656
  721
  790
  861
  935
  1,012
  1,092
  1,175
  1,262
  1,352
  1,445
  1,543
  1,644
  1,749
  1,858
  1,972
  2,091
  2,215
  2,344
  2,479
  2,619
  2,766
  2,919
Total equity, $m
  237
  276
  319
  364
  413
  465
  520
  577
  638
  701
  768
  837
  909
  984
  1,062
  1,143
  1,227
  1,315
  1,406
  1,500
  1,598
  1,701
  1,807
  1,918
  2,033
  2,154
  2,279
  2,410
  2,547
  2,689
  2,838
Total liabilities and equity, $m
  717
  560
  647
  739
  838
  943
  1,054
  1,171
  1,294
  1,422
  1,558
  1,698
  1,844
  1,996
  2,154
  2,318
  2,489
  2,667
  2,851
  3,043
  3,242
  3,450
  3,665
  3,890
  4,124
  4,369
  4,623
  4,889
  5,166
  5,455
  5,757
Debt-to-equity ratio
  1.232
  0.350
  0.440
  0.510
  0.570
  0.620
  0.670
  0.700
  0.730
  0.760
  0.780
  0.800
  0.820
  0.840
  0.850
  0.860
  0.880
  0.890
  0.890
  0.900
  0.910
  0.920
  0.920
  0.930
  0.940
  0.940
  0.950
  0.950
  0.950
  0.960
  0.960
Adjusted equity ratio
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  77
  93
  107
  121
  137
  153
  171
  189
  208
  229
  250
  272
  295
  319
  344
  369
  396
  424
  453
  483
  514
  547
  581
  616
  653
  691
  731
  773
  816
  862
  909
Depreciation, amort., depletion, $m
  12
  11
  13
  15
  17
  19
  21
  23
  26
  28
  31
  33
  36
  39
  42
  45
  49
  52
  56
  60
  63
  67
  72
  76
  81
  85
  90
  96
  101
  107
  113
Funds from operations, $m
  57
  105
  120
  136
  154
  172
  192
  212
  234
  257
  281
  305
  331
  358
  386
  415
  445
  476
  509
  543
  578
  614
  653
  692
  734
  777
  821
  868
  917
  968
  1,022
Change in working capital, $m
  -22
  38
  41
  44
  47
  50
  53
  56
  59
  62
  64
  67
  70
  73
  76
  79
  82
  85
  88
  92
  95
  99
  103
  108
  112
  117
  122
  127
  133
  138
  145
Cash from operations, $m
  79
  67
  79
  92
  106
  122
  139
  156
  175
  195
  216
  238
  261
  285
  310
  336
  363
  391
  421
  451
  482
  515
  549
  585
  621
  660
  700
  741
  785
  830
  877
Maintenance CAPEX, $m
  0
  -9
  -11
  -13
  -14
  -16
  -18
  -21
  -23
  -25
  -28
  -30
  -33
  -36
  -39
  -42
  -45
  -49
  -52
  -56
  -60
  -63
  -67
  -72
  -76
  -81
  -85
  -90
  -96
  -101
  -107
New CAPEX, $m
  -5
  -8
  -8
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
Cash from investing activities, $m
  -5
  -17
  -19
  -22
  -24
  -26
  -29
  -32
  -35
  -38
  -41
  -44
  -47
  -51
  -54
  -58
  -62
  -66
  -70
  -75
  -80
  -83
  -88
  -94
  -99
  -105
  -110
  -116
  -123
  -129
  -137
Free cash flow, $m
  74
  49
  59
  70
  82
  95
  109
  124
  140
  157
  175
  194
  214
  234
  256
  278
  301
  325
  350
  376
  403
  431
  461
  491
  522
  555
  589
  625
  662
  701
  741
Issuance/(repayment) of debt, $m
  -1
  40
  44
  47
  50
  53
  56
  59
  62
  65
  68
  71
  74
  77
  80
  83
  87
  90
  94
  97
  101
  105
  109
  114
  119
  124
  129
  135
  141
  147
  153
Issuance/(repurchase) of shares, $m
  -3
  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  
  -4
  40
  44
  47
  50
  53
  56
  59
  62
  65
  68
  71
  74
  77
  80
  83
  87
  90
  94
  97
  101
  105
  109
  114
  119
  124
  129
  135
  141
  147
  153
Total cash flow (excl. dividends), $m
  70
  89
  103
  117
  132
  148
  166
  184
  203
  223
  243
  265
  288
  311
  336
  361
  388
  415
  444
  474
  504
  537
  570
  605
  641
  679
  718
  760
  802
  847
  894
Retained Cash Flow (-), $m
  -22
  -39
  -42
  -46
  -49
  -52
  -55
  -58
  -61
  -63
  -66
  -69
  -72
  -75
  -78
  -81
  -84
  -88
  -91
  -95
  -98
  -102
  -106
  -111
  -115
  -120
  -125
  -131
  -137
  -143
  -149
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
 
  50
  60
  71
  84
  97
  111
  126
  142
  159
  177
  196
  216
  236
  258
  280
  304
  328
  353
  379
  406
  434
  464
  494
  526
  559
  593
  629
  666
  705
  745
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
 
  48
  55
  62
  69
  75
  80
  85
  89
  91
  93
  93
  92
  90
  87
  82
  77
  71
  65
  58
  52
  45
  38
  32
  27
  22
  17
  13
  10
  8
  6
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

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 23
Price to Sales 3.4
Price to Book 7.5
Price to Tangible Book
Price to Cash Flow 22.4
Price to Free Cash Flow 23.9
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 $517 million for the last fiscal year's total revenue generated by HFF Cl A. The default revenue input number comes from 2016 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 16.5% 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 78.5%.

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 3.5% 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 9.1%.

Life of production assets of 4.3 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 44.5%. 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 - $237 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 38.446 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 $1.8 billion.

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COMPANY NEWS

▶ HFF, Inc. Class A to Host Earnings Call   [06:20AM  ACCESSWIRE]
▶ HFF posts 3Q profit   [Nov-01-17 06:53PM  Associated Press]
▶ [$$] Lenders Jockey for Chicago Hotel Loan   [Sep-26-17 06:40PM  The Wall Street Journal]
▶ HFF Announces $270M Refinancing for JW Marriott Chicago   [Sep-25-17 04:17PM  Business Wire]
▶ Pittsburgh Draws a Big Bet on Downtown Revival   [Sep-19-17 06:14PM  The Wall Street Journal]
▶ ETFs with exposure to HFF, Inc. : September 18, 2017   [Sep-18-17 05:57PM  Capital Cube]
▶ HFF Arranges $150 Million Financing for MILA in Chicago   [Aug-14-17 04:21PM  Business Wire]
▶ HFF posts 2Q profit   [Jul-27-17 11:51PM  Associated Press]
▶ HFF Closes Sale of Alexan Melrose in San Diego Area   [Jun-20-17 04:19PM  Business Wire]
Financial statements of HF
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