Intrinsic value of Hill International - HIL

Previous Close

$5.90

  Intrinsic Value

$1.28

stock screener

  Rating & Target

str. sell

-78%

Previous close

$5.90

 
Intrinsic value

$1.28

 
Up/down potential

-78%

 
Rating

str. sell

We calculate the intrinsic value of HIL 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 2016), $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 0.3

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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, %
  2.00
  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
  531
  544
  558
  573
  591
  610
  631
  653
  677
  703
  731
  761
  792
  826
  861
  899
  939
  981
  1,026
  1,073
  1,123
  1,175
  1,231
  1,289
  1,350
  1,415
  1,483
  1,555
  1,630
  1,709
Variable operating expenses, $m
  194
  198
  203
  209
  215
  222
  229
  237
  245
  255
  259
  269
  281
  292
  305
  318
  333
  347
  363
  380
  398
  416
  436
  456
  478
  501
  525
  550
  577
  605
Fixed operating expenses, $m
  345
  353
  361
  369
  377
  385
  394
  402
  411
  420
  429
  439
  449
  458
  468
  479
  489
  500
  511
  522
  534
  546
  558
  570
  582
  595
  608
  622
  635
  649
Total operating expenses, $m
  539
  551
  564
  578
  592
  607
  623
  639
  656
  675
  688
  708
  730
  750
  773
  797
  822
  847
  874
  902
  932
  962
  994
  1,026
  1,060
  1,096
  1,133
  1,172
  1,212
  1,254
Operating income, $m
  -8
  -8
  -6
  -4
  -1
  3
  8
  14
  21
  28
  43
  52
  63
  75
  88
  102
  117
  134
  152
  171
  192
  214
  237
  263
  290
  319
  350
  383
  417
  455
EBITDA, $m
  6
  6
  8
  10
  13
  18
  23
  29
  36
  44
  54
  64
  75
  87
  101
  115
  131
  148
  167
  187
  208
  231
  256
  282
  310
  340
  371
  405
  441
  480
Interest expense (income), $m
  12
  8
  8
  9
  9
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  26
  27
  29
  31
  33
  35
  37
  39
  41
  44
Earnings before tax, $m
  -16
  -16
  -15
  -13
  -10
  -7
  -3
  2
  9
  16
  29
  38
  48
  58
  70
  83
  97
  113
  129
  147
  166
  186
  208
  232
  257
  284
  313
  344
  376
  411
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  1
  2
  4
  8
  10
  13
  16
  19
  22
  26
  30
  35
  40
  45
  50
  56
  63
  69
  77
  84
  93
  102
  111
Net income, $m
  -16
  -16
  -15
  -13
  -10
  -7
  -3
  2
  6
  11
  21
  28
  35
  43
  51
  61
  71
  82
  94
  107
  121
  136
  152
  169
  188
  207
  228
  251
  275
  300

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
  409
  419
  430
  442
  455
  470
  486
  503
  522
  542
  563
  586
  610
  636
  664
  693
  724
  756
  791
  827
  865
  906
  948
  993
  1,040
  1,090
  1,143
  1,198
  1,256
  1,317
Adjusted assets (=assets-cash), $m
  409
  419
  430
  442
  455
  470
  486
  503
  522
  542
  563
  586
  610
  636
  664
  693
  724
  756
  791
  827
  865
  906
  948
  993
  1,040
  1,090
  1,143
  1,198
  1,256
  1,317
Revenue / Adjusted assets
  1.298
  1.298
  1.298
  1.296
  1.299
  1.298
  1.298
  1.298
  1.297
  1.297
  1.298
  1.299
  1.298
  1.299
  1.297
  1.297
  1.297
  1.298
  1.297
  1.297
  1.298
  1.297
  1.299
  1.298
  1.298
  1.298
  1.297
  1.298
  1.298
  1.298
Average production assets, $m
  78
  80
  82
  84
  87
  90
  93
  96
  100
  103
  107
  112
  116
  121
  127
  132
  138
  144
  151
  158
  165
  173
  181
  189
  199
  208
  218
  229
  240
  251
Working capital, $m
  -87
  -89
  -91
  -93
  -96
  -99
  -103
  -106
  -110
  -115
  -119
  -124
  -129
  -135
  -140
  -147
  -153
  -160
  -167
  -175
  -183
  -192
  -201
  -210
  -220
  -231
  -242
  -253
  -266
  -279
Total debt, $m
  150
  158
  166
  175
  186
  197
  210
  223
  238
  253
  270
  288
  307
  327
  349
  371
  395
  421
  447
  476
  506
  537
  570
  605
  642
  681
  722
  765
  810
  858
Total liabilities, $m
  319
  327
  335
  345
  355
  366
  379
  392
  407
  423
  439
  457
  476
  496
  518
  540
  564
  590
  617
  645
  675
  706
  740
  775
  811
  850
  891
  934
  979
  1,027
Total equity, $m
  90
  92
  95
  97
  100
  103
  107
  111
  115
  119
  124
  129
  134
  140
  146
  152
  159
  166
  174
  182
  190
  199
  209
  218
  229
  240
  251
  263
  276
  290
Total liabilities and equity, $m
  409
  419
  430
  442
  455
  469
  486
  503
  522
  542
  563
  586
  610
  636
  664
  692
  723
  756
  791
  827
  865
  905
  949
  993
  1,040
  1,090
  1,142
  1,197
  1,255
  1,317
Debt-to-equity ratio
  1.670
  1.710
  1.760
  1.810
  1.860
  1.910
  1.960
  2.020
  2.070
  2.130
  2.180
  2.230
  2.290
  2.340
  2.390
  2.440
  2.480
  2.530
  2.570
  2.620
  2.660
  2.700
  2.730
  2.770
  2.810
  2.840
  2.870
  2.900
  2.930
  2.960
Adjusted equity ratio
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -16
  -16
  -15
  -13
  -10
  -7
  -3
  2
  6
  11
  21
  28
  35
  43
  51
  61
  71
  82
  94
  107
  121
  136
  152
  169
  188
  207
  228
  251
  275
  300
Depreciation, amort., depletion, $m
  14
  14
  14
  14
  14
  15
  15
  15
  16
  16
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
Funds from operations, $m
  -2
  -2
  -1
  1
  4
  8
  12
  17
  22
  27
  32
  39
  46
  55
  64
  74
  85
  97
  109
  123
  138
  153
  170
  188
  208
  228
  250
  274
  299
  325
Change in working capital, $m
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -11
  -11
  -12
  -12
  -13
Cash from operations, $m
  0
  0
  1
  4
  7
  11
  16
  21
  26
  32
  37
  44
  52
  60
  70
  80
  91
  103
  117
  131
  146
  162
  179
  198
  218
  239
  261
  285
  311
  338
Maintenance CAPEX, $m
  -8
  -8
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
New CAPEX, $m
  -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
  -9
  -10
  -11
  -11
  -12
Cash from investing activities, $m
  -10
  -10
  -10
  -10
  -11
  -12
  -12
  -12
  -14
  -14
  -14
  -15
  -16
  -17
  -17
  -19
  -19
  -20
  -21
  -22
  -23
  -25
  -25
  -27
  -28
  -29
  -31
  -33
  -34
  -36
Free cash flow, $m
  -10
  -10
  -9
  -7
  -4
  -1
  4
  8
  13
  18
  22
  29
  36
  44
  52
  62
  72
  83
  96
  109
  123
  138
  154
  171
  190
  209
  230
  253
  277
  302
Issuance/(repayment) of debt, $m
  6
  7
  8
  9
  10
  11
  12
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  32
  33
  35
  37
  39
  41
  43
  45
  48
Issuance/(repurchase) of shares, $m
  18
  18
  17
  16
  13
  10
  6
  2
  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  
  24
  25
  25
  25
  23
  21
  18
  16
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  32
  33
  35
  37
  39
  41
  43
  45
  48
Total cash flow (excl. dividends), $m
  14
  15
  17
  18
  20
  21
  22
  24
  27
  33
  39
  46
  55
  64
  74
  85
  96
  109
  122
  137
  153
  169
  187
  206
  227
  248
  271
  296
  322
  350
Retained Cash Flow (-), $m
  -18
  -18
  -17
  -16
  -13
  -10
  -6
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -13
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
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
Cash available for distribution, $m
  -4
  -2
  0
  3
  6
  11
  16
  20
  23
  29
  34
  41
  49
  58
  68
  78
  89
  102
  115
  129
  144
  160
  178
  196
  216
  237
  260
  284
  309
  337
Discount rate, %
  9.10
  9.56
  10.03
  10.53
  11.06
  11.61
  12.19
  12.80
  13.44
  14.12
  14.82
  15.56
  16.34
  17.16
  18.02
  18.92
  19.86
  20.86
  21.90
  23.00
  24.15
  25.35
  26.62
  27.95
  29.35
  30.82
  32.36
  33.97
  35.67
  37.46
PV of cash for distribution, $m
  -3
  -2
  0
  2
  4
  6
  7
  8
  7
  8
  7
  7
  7
  6
  6
  5
  4
  3
  3
  2
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  94.5
  89.5
  84.9
  81.1
  78.0
  75.7
  74.5
  74.1
  74.1
  74.1
  74.1
  74.1
  74.1
  74.1
  74.1
  74.1
  74.1
  74.1
  74.1
  74.1
  74.1
  74.1
  74.1
  74.1
  74.1
  74.1
  74.1
  74.1
  74.1
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Hill International, Inc. is a professional services firm. The Company provides program management, project management, construction management and other consulting services primarily to the buildings, transportation, environmental, energy and industrial markets worldwide. It operates in Project Management Group segment. The Project Management Group segment provides construction and project management services to construction owners worldwide. Its services include project management oversight, troubled project turnaround, staff augmentation, project labor agreement consulting, commissioning, estimating and cost management, labor compliance services and facilities management services. The Company’s clients include the United States federal government, the United States state and local governments, foreign governments and the private sector.

FINANCIAL RATIOS  of  Hill International (HIL)

Valuation Ratios
P/E Ratio -16.1
Price to Sales 0.6
Price to Book 3.5
Price to Tangible Book
Price to Cash Flow 30.6
Price to Free Cash Flow 34
Growth Rates
Sales Growth Rate -5.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -92.9%
Cap. Spend. - 3 Yr. Gr. Rate -24.2%
Financial Strength
Quick Ratio 13
Current Ratio 0.4
LT Debt to Equity 161.4%
Total Debt to Equity 163.6%
Interest Coverage 1
Management Effectiveness
Return On Assets 6.9%
Ret/ On Assets - 3 Yr. Avg. 4.3%
Return On Total Capital -7.7%
Ret/ On T. Cap. - 3 Yr. Avg. -2.5%
Return On Equity -18.8%
Return On Equity - 3 Yr. Avg. -6.2%
Asset Turnover 1.2
Profitability Ratios
Gross Margin 31.1%
Gross Margin - 3 Yr. Avg. 32.4%
EBITDA Margin 3.3%
EBITDA Margin - 3 Yr. Avg. 7.2%
Operating Margin -0.2%
Oper. Margin - 3 Yr. Avg. 2.7%
Pre-Tax Margin -0.4%
Pre-Tax Margin - 3 Yr. Avg. 2.3%
Net Profit Margin -3.6%
Net Profit Margin - 3 Yr. Avg. -1.2%
Effective Tax Rate -300%
Eff/ Tax Rate - 3 Yr. Avg. -77.1%
Payout Ratio 0%

HIL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HIL stock intrinsic value calculation we used $521 million for the last fiscal year's total revenue generated by Hill International. The default revenue input number comes from 2016 income statement of Hill International. 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 HIL 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 9.1%, whose default value for HIL is calculated based on our internal credit rating of Hill International, 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 Hill International.
    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 HIL stock the variable cost ratio is equal to 36.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $338 million in the base year in the intrinsic value calculation for HIL 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 Hill International.

Corporate tax rate of 27% is the nominal tax rate for Hill International. 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 HIL stock is equal to 0.5%.

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 HIL are equal to 14.7%.

Life of production assets of 10 years is the average useful life of capital assets used in Hill International 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 HIL is equal to -16.3%. 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 - $88 million for Hill International - 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 52 million for Hill International 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 Hill International at the current share price and the inputted number of shares is $0.3 billion.

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COMPANY NEWS

▶ Hill International: 3Q Earnings Snapshot   [Jul-12-18 03:27PM  Associated Press]
▶ Hill International Announces Filing   [02:51PM  GlobeNewswire]
▶ Hill International Announces Filing   [Jun-22-18 08:38AM  GlobeNewswire]
▶ How Financially Strong Is Hill International Inc (NYSE:HIL)?   [Jun-07-18 01:30PM  Simply Wall St.]
▶ Hill International Announces Restatement Filing   [May-08-18 05:00PM  GlobeNewswire]
▶ Hill International NYSE Notice Regarding Listing Extension   [Feb-16-18 06:50AM  GlobeNewswire]
▶ [$$] Engine Capital Approaches Hill International   [Nov-17-17 10:34PM  Barrons.com]
▶ Hill International Announces Two Executive Promotions   [Nov-10-17 12:37PM  GlobeNewswire]
▶ Hill International reports 1Q loss   [May-04-17 05:03AM  Associated Press]
▶ New Strong Sell Stocks for April 26th   [Apr-26-17 10:20AM  Zacks]
▶ Hill International reports 4Q loss   [Mar-29-17 05:16PM  Associated Press]
▶ Hill International Project Wins ENRs Best of the Best Award   [Jan-31-17 08:30AM  GlobeNewswire]
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