Intrinsic value of Hill International - HIL

Previous Close

$5.10

  Intrinsic Value

$0.17

stock screener

  Rating & Target

str. sell

-97%

  Value-price divergence*

-102%

Previous close

$5.10

 
Intrinsic value

$0.17

 
Up/down potential

-97%

 
Rating

str. sell

 
Value-price divergence*

-102%

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

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
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, %
  -5.79
  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
  521
  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
 
  183
  187
  191
  197
  203
  209
  216
  223
  231
  240
  244
  254
  265
  276
  288
  301
  314
  328
  343
  359
  375
  393
  411
  431
  451
  473
  496
  520
  545
  571
Fixed operating expenses, $m
 
  361
  370
  379
  389
  398
  408
  418
  429
  440
  451
  462
  473
  485
  497
  510
  523
  536
  549
  563
  577
  591
  606
  621
  637
  653
  669
  686
  703
  720
  738
Total operating expenses, $m
  522
  544
  557
  570
  586
  601
  617
  634
  652
  671
  691
  706
  727
  750
  773
  798
  824
  850
  877
  906
  936
  966
  999
  1,032
  1,068
  1,104
  1,142
  1,182
  1,223
  1,265
  1,309
Operating income, $m
  -1
  -12
  -13
  -13
  -12
  -10
  -7
  -4
  1
  6
  12
  25
  33
  42
  52
  64
  76
  90
  104
  120
  138
  156
  177
  198
  222
  246
  273
  302
  332
  365
  400
EBITDA, $m
  6
  -5
  -5
  -5
  -4
  -2
  0
  4
  9
  14
  21
  28
  36
  46
  56
  68
  80
  94
  109
  125
  143
  161
  182
  204
  227
  252
  279
  308
  339
  372
  407
Interest expense (income), $m
  12
  12
  12
  13
  14
  14
  15
  16
  17
  18
  20
  21
  22
  24
  25
  27
  29
  31
  32
  35
  37
  39
  42
  44
  47
  50
  53
  56
  59
  63
  67
Earnings before tax, $m
  -2
  -24
  -25
  -26
  -26
  -24
  -23
  -20
  -16
  -12
  -7
  4
  11
  19
  27
  37
  47
  59
  72
  86
  101
  117
  135
  154
  175
  197
  220
  246
  273
  302
  333
Tax expense, $m
  6
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  3
  5
  7
  10
  13
  16
  19
  23
  27
  32
  36
  42
  47
  53
  59
  66
  74
  81
  90
Net income, $m
  -19
  -24
  -25
  -26
  -26
  -24
  -23
  -20
  -16
  -12
  -7
  3
  8
  14
  20
  27
  35
  43
  53
  63
  74
  86
  99
  112
  127
  144
  161
  179
  199
  220
  243

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  26
  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
  401
  383
  391
  401
  413
  425
  439
  454
  470
  488
  506
  526
  548
  570
  595
  620
  647
  676
  707
  739
  773
  808
  846
  886
  928
  972
  1,019
  1,068
  1,119
  1,173
  1,230
Adjusted assets (=assets-cash), $m
  375
  383
  391
  401
  413
  425
  439
  454
  470
  488
  506
  526
  548
  570
  595
  620
  647
  676
  707
  739
  773
  808
  846
  886
  928
  972
  1,019
  1,068
  1,119
  1,173
  1,230
Revenue / Adjusted assets
  1.389
  1.386
  1.391
  1.392
  1.387
  1.391
  1.390
  1.390
  1.389
  1.387
  1.389
  1.390
  1.389
  1.389
  1.388
  1.389
  1.389
  1.389
  1.388
  1.388
  1.388
  1.390
  1.389
  1.389
  1.389
  1.389
  1.389
  1.389
  1.390
  1.390
  1.389
Average production assets, $m
  32
  32
  33
  33
  34
  35
  37
  38
  39
  41
  42
  44
  46
  48
  50
  52
  54
  56
  59
  62
  64
  67
  71
  74
  77
  81
  85
  89
  93
  98
  103
Working capital, $m
  126
  104
  107
  109
  112
  116
  120
  124
  128
  133
  138
  143
  149
  155
  162
  169
  176
  184
  192
  201
  210
  220
  230
  241
  253
  265
  277
  291
  305
  319
  335
Total debt, $m
  144
  148
  155
  164
  173
  184
  195
  207
  221
  235
  251
  267
  285
  304
  324
  345
  368
  392
  417
  443
  472
  501
  533
  566
  600
  637
  676
  716
  759
  804
  851
Total liabilities, $m
  313
  317
  324
  333
  342
  353
  364
  376
  390
  404
  420
  436
  454
  473
  493
  514
  537
  561
  586
  612
  641
  670
  702
  735
  769
  806
  845
  885
  928
  973
  1,020
Total equity, $m
  88
  65
  67
  69
  71
  73
  75
  78
  80
  83
  87
  90
  94
  98
  102
  106
  111
  116
  121
  126
  132
  138
  145
  152
  159
  166
  174
  183
  191
  201
  210
Total liabilities and equity, $m
  401
  382
  391
  402
  413
  426
  439
  454
  470
  487
  507
  526
  548
  571
  595
  620
  648
  677
  707
  738
  773
  808
  847
  887
  928
  972
  1,019
  1,068
  1,119
  1,174
  1,230
Debt-to-equity ratio
  1.636
  2.260
  2.320
  2.390
  2.450
  2.520
  2.600
  2.670
  2.750
  2.820
  2.900
  2.970
  3.040
  3.120
  3.190
  3.250
  3.320
  3.390
  3.450
  3.510
  3.570
  3.630
  3.680
  3.730
  3.780
  3.830
  3.880
  3.920
  3.960
  4.010
  4.040
Adjusted equity ratio
  0.165
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -19
  -24
  -25
  -26
  -26
  -24
  -23
  -20
  -16
  -12
  -7
  3
  8
  14
  20
  27
  35
  43
  53
  63
  74
  86
  99
  112
  127
  144
  161
  179
  199
  220
  243
Depreciation, amort., depletion, $m
  7
  7
  8
  8
  8
  8
  8
  8
  8
  8
  8
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
Funds from operations, $m
  -1
  -16
  -18
  -18
  -18
  -17
  -15
  -12
  -8
  -4
  1
  6
  11
  17
  24
  31
  39
  47
  57
  67
  78
  91
  104
  118
  133
  150
  167
  186
  206
  228
  251
Change in working capital, $m
  -11
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
Cash from operations, $m
  10
  -18
  -20
  -21
  -21
  -20
  -19
  -16
  -13
  -9
  -4
  1
  5
  11
  17
  24
  31
  40
  49
  58
  69
  81
  93
  107
  122
  138
  154
  173
  192
  213
  235
Maintenance CAPEX, $m
  0
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
New CAPEX, $m
  -1
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
Cash from investing activities, $m
  -4
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -8
  -8
  -10
  -10
  -10
  -11
  -12
  -12
Free cash flow, $m
  6
  -21
  -23
  -24
  -24
  -24
  -22
  -20
  -17
  -13
  -8
  -4
  0
  6
  11
  18
  25
  33
  42
  51
  62
  73
  85
  99
  113
  128
  145
  162
  181
  201
  223
Issuance/(repayment) of debt, $m
  -2
  6
  7
  8
  9
  10
  11
  12
  13
  14
  16
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  31
  33
  35
  37
  39
  41
  43
  45
  47
Issuance/(repurchase) of shares, $m
  1
  25
  27
  28
  27
  27
  25
  22
  19
  15
  10
  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
  31
  34
  36
  36
  37
  36
  34
  32
  29
  26
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  31
  33
  35
  37
  39
  41
  43
  45
  47
Total cash flow (excl. dividends), $m
  2
  10
  11
  12
  12
  13
  14
  15
  16
  16
  17
  13
  18
  24
  31
  39
  48
  57
  67
  78
  90
  103
  117
  132
  148
  165
  183
  203
  224
  246
  270
Retained Cash Flow (-), $m
  26
  -25
  -27
  -28
  -27
  -27
  -25
  -22
  -19
  -15
  -10
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
Prev. year cash balance distribution, $m
 
  24
  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
 
  9
  -16
  -16
  -15
  -13
  -11
  -8
  -4
  1
  7
  10
  15
  21
  27
  35
  43
  52
  62
  73
  84
  97
  110
  125
  140
  157
  175
  194
  215
  237
  261
Discount rate, %
 
  8.20
  8.61
  9.04
  9.49
  9.97
  10.47
  10.99
  11.54
  12.12
  12.72
  13.36
  14.02
  14.73
  15.46
  16.24
  17.05
  17.90
  18.79
  19.73
  20.72
  21.76
  22.84
  23.99
  25.19
  26.45
  27.77
  29.16
  30.61
  32.15
  33.75
PV of cash for distribution, $m
 
  8
  -14
  -12
  -10
  -8
  -6
  -4
  -1
  0
  2
  2
  3
  3
  4
  4
  3
  3
  3
  2
  2
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  88.8
  78.6
  69.5
  61.6
  55.0
  49.6
  45.3
  42.0
  39.6
  38.1
  38.1
  38.1
  38.1
  38.1
  38.1
  38.1
  38.1
  38.1
  38.1
  38.1
  38.1
  38.1
  38.1
  38.1
  38.1
  38.1
  38.1
  38.1
  38.1
  38.1

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 -13.9
Price to Sales 0.5
Price to Book 3
Price to Tangible Book
Price to Cash Flow 26.4
Price to Free Cash Flow 29.4
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 8.2%, 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 34.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $352 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 8.3% 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%.

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 6%.

Life of production assets of 13.5 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 19.6%. 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 54.183 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 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]
▶ Is Star Bulk Carriers Corp. (SBLK) A Good Stock To Buy?   [Dec-18-16 10:12AM  at Insider Monkey]
Financial statements of HIL
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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