Intrinsic value of Heidrick&Struggles International - HSII

Previous Close

$26.25

  Intrinsic Value

$76.18

stock screener

  Rating & Target

str. buy

+190%

Previous close

$26.25

 
Intrinsic value

$76.18

 
Up/down potential

+190%

 
Rating

str. buy

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

We calculate the intrinsic value of HSII 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

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, %
  9.67
  10.80
  10.22
  9.70
  9.23
  8.81
  8.42
  8.08
  7.77
  7.50
  7.25
  7.02
  6.82
  6.64
  6.47
  6.33
  6.19
  6.07
  5.97
  5.87
  5.78
  5.71
  5.63
  5.57
  5.51
  5.46
  5.42
  5.37
  5.34
  5.30
  5.27
Revenue, $m
  601
  666
  734
  805
  879
  957
  1,037
  1,121
  1,209
  1,299
  1,393
  1,491
  1,593
  1,699
  1,809
  1,923
  2,042
  2,166
  2,295
  2,430
  2,571
  2,717
  2,870
  3,030
  3,197
  3,372
  3,555
  3,746
  3,946
  4,155
  4,374
Variable operating expenses, $m
 
  623
  685
  750
  818
  889
  962
  1,039
  1,118
  1,201
  1,287
  1,361
  1,454
  1,550
  1,651
  1,755
  1,864
  1,977
  2,095
  2,218
  2,346
  2,480
  2,620
  2,766
  2,918
  3,078
  3,244
  3,419
  3,601
  3,792
  3,992
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
  566
  623
  685
  750
  818
  889
  962
  1,039
  1,118
  1,201
  1,287
  1,361
  1,454
  1,550
  1,651
  1,755
  1,864
  1,977
  2,095
  2,218
  2,346
  2,480
  2,620
  2,766
  2,918
  3,078
  3,244
  3,419
  3,601
  3,792
  3,992
Operating income, $m
  35
  43
  49
  55
  62
  68
  75
  83
  90
  98
  106
  130
  139
  148
  158
  168
  178
  189
  200
  212
  224
  237
  251
  265
  279
  294
  310
  327
  344
  363
  382
EBITDA, $m
  51
  63
  70
  76
  83
  91
  98
  106
  115
  123
  132
  141
  151
  161
  171
  182
  194
  205
  218
  230
  244
  258
  272
  287
  303
  320
  337
  355
  374
  394
  415
Interest expense (income), $m
  0
  0
  1
  3
  4
  5
  7
  8
  10
  11
  13
  15
  17
  19
  21
  23
  25
  27
  29
  32
  34
  37
  40
  43
  46
  49
  52
  56
  59
  63
  67
Earnings before tax, $m
  38
  43
  48
  53
  58
  63
  69
  74
  80
  87
  93
  115
  122
  130
  137
  145
  153
  162
  171
  180
  190
  200
  211
  222
  233
  245
  258
  271
  285
  300
  315
Tax expense, $m
  23
  12
  13
  14
  16
  17
  19
  20
  22
  23
  25
  31
  33
  35
  37
  39
  41
  44
  46
  49
  51
  54
  57
  60
  63
  66
  70
  73
  77
  81
  85
Net income, $m
  15
  31
  35
  38
  42
  46
  50
  54
  59
  63
  68
  84
  89
  95
  100
  106
  112
  118
  125
  132
  139
  146
  154
  162
  170
  179
  188
  198
  208
  219
  230

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  165
  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
  582
  462
  509
  559
  610
  664
  720
  778
  839
  902
  967
  1,035
  1,105
  1,179
  1,255
  1,334
  1,417
  1,503
  1,593
  1,686
  1,784
  1,886
  1,992
  2,103
  2,219
  2,340
  2,467
  2,599
  2,738
  2,883
  3,035
Adjusted assets (=assets-cash), $m
  417
  462
  509
  559
  610
  664
  720
  778
  839
  902
  967
  1,035
  1,105
  1,179
  1,255
  1,334
  1,417
  1,503
  1,593
  1,686
  1,784
  1,886
  1,992
  2,103
  2,219
  2,340
  2,467
  2,599
  2,738
  2,883
  3,035
Revenue / Adjusted assets
  1.441
  1.442
  1.442
  1.440
  1.441
  1.441
  1.440
  1.441
  1.441
  1.440
  1.441
  1.441
  1.442
  1.441
  1.441
  1.442
  1.441
  1.441
  1.441
  1.441
  1.441
  1.441
  1.441
  1.441
  1.441
  1.441
  1.441
  1.441
  1.441
  1.441
  1.441
Average production assets, $m
  56
  61
  68
  74
  81
  88
  95
  103
  111
  120
  128
  137
  147
  156
  166
  177
  188
  199
  211
  224
  236
  250
  264
  279
  294
  310
  327
  345
  363
  382
  402
Working capital, $m
  77
  -97
  -107
  -118
  -128
  -140
  -151
  -164
  -176
  -190
  -203
  -218
  -233
  -248
  -264
  -281
  -298
  -316
  -335
  -355
  -375
  -397
  -419
  -442
  -467
  -492
  -519
  -547
  -576
  -607
  -639
Total debt, $m
  0
  35
  72
  110
  150
  192
  235
  280
  327
  376
  426
  479
  534
  591
  650
  711
  775
  842
  911
  984
  1,060
  1,138
  1,221
  1,307
  1,397
  1,491
  1,589
  1,692
  1,799
  1,912
  2,029
Total liabilities, $m
  323
  358
  395
  433
  473
  515
  558
  603
  650
  699
  749
  802
  857
  914
  973
  1,034
  1,098
  1,165
  1,234
  1,307
  1,383
  1,461
  1,544
  1,630
  1,720
  1,814
  1,912
  2,015
  2,122
  2,235
  2,352
Total equity, $m
  259
  104
  115
  126
  137
  149
  162
  175
  189
  203
  218
  233
  249
  265
  282
  300
  319
  338
  358
  379
  401
  424
  448
  473
  499
  527
  555
  585
  616
  649
  683
Total liabilities and equity, $m
  582
  462
  510
  559
  610
  664
  720
  778
  839
  902
  967
  1,035
  1,106
  1,179
  1,255
  1,334
  1,417
  1,503
  1,592
  1,686
  1,784
  1,885
  1,992
  2,103
  2,219
  2,341
  2,467
  2,600
  2,738
  2,884
  3,035
Debt-to-equity ratio
  0.000
  0.340
  0.630
  0.880
  1.090
  1.280
  1.450
  1.600
  1.730
  1.850
  1.960
  2.060
  2.150
  2.230
  2.300
  2.370
  2.430
  2.490
  2.540
  2.590
  2.640
  2.680
  2.720
  2.760
  2.800
  2.830
  2.860
  2.890
  2.920
  2.950
  2.970
Adjusted equity ratio
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  15
  31
  35
  38
  42
  46
  50
  54
  59
  63
  68
  84
  89
  95
  100
  106
  112
  118
  125
  132
  139
  146
  154
  162
  170
  179
  188
  198
  208
  219
  230
Depreciation, amort., depletion, $m
  16
  20
  21
  21
  22
  22
  23
  24
  24
  25
  26
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  31
  33
Funds from operations, $m
  9
  52
  55
  60
  64
  68
  73
  78
  83
  88
  94
  95
  101
  107
  114
  120
  127
  134
  142
  150
  158
  166
  175
  185
  194
  204
  215
  226
  238
  250
  263
Change in working capital, $m
  -16
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -29
  -31
  -32
Cash from operations, $m
  25
  61
  65
  70
  75
  80
  85
  90
  96
  101
  107
  110
  116
  123
  130
  137
  145
  153
  161
  169
  178
  188
  198
  208
  219
  230
  242
  254
  267
  280
  295
Maintenance CAPEX, $m
  0
  -5
  -5
  -5
  -6
  -7
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -27
  -28
  -30
  -31
New CAPEX, $m
  -5
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -19
  -20
Cash from investing activities, $m
  -28
  -11
  -11
  -12
  -13
  -14
  -14
  -16
  -16
  -17
  -19
  -19
  -20
  -22
  -23
  -25
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -36
  -38
  -40
  -42
  -45
  -46
  -49
  -51
Free cash flow, $m
  -3
  51
  54
  58
  62
  66
  70
  75
  79
  84
  89
  90
  96
  101
  107
  113
  119
  126
  133
  140
  147
  155
  163
  172
  181
  190
  200
  210
  221
  232
  243
Issuance/(repayment) of debt, $m
  0
  35
  37
  38
  40
  42
  43
  45
  47
  49
  51
  53
  55
  57
  59
  62
  64
  67
  70
  72
  76
  79
  82
  86
  90
  94
  98
  103
  108
  113
  118
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
  0
Cash from financing (excl. dividends), $m  
  -10
  35
  37
  38
  40
  42
  43
  45
  47
  49
  51
  53
  55
  57
  59
  62
  64
  67
  70
  72
  76
  79
  82
  86
  90
  94
  98
  103
  108
  113
  118
Total cash flow (excl. dividends), $m
  -15
  86
  91
  96
  102
  108
  114
  120
  126
  133
  140
  143
  150
  158
  166
  175
  183
  193
  202
  212
  223
  234
  246
  258
  270
  284
  298
  313
  328
  344
  361
Retained Cash Flow (-), $m
  -4
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -33
  -34
Prev. year cash balance distribution, $m
 
  165
  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
 
  241
  80
  85
  90
  96
  101
  107
  113
  119
  125
  127
  134
  141
  149
  157
  165
  173
  182
  191
  201
  211
  222
  233
  244
  257
  269
  283
  297
  312
  327
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
 
  231
  73
  74
  74
  74
  73
  72
  70
  68
  66
  61
  57
  54
  50
  46
  42
  38
  34
  29
  26
  22
  18
  15
  12
  10
  8
  6
  5
  3
  2
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

Heidrick & Struggles International, Inc. is an advisory firm providing executive search, leadership consulting and culture shaping services to businesses and business leaders around the world. Its segments include Executive Search, Leadership Consulting and Culture Shaping. It operates its executive search services in three geographic regions: the Americas (which includes the countries in North and South America); Europe (which includes the continents of Europe and Africa), and Asia Pacific (which includes Asia and the region generally known as the Middle East). Its Leadership Consulting segment operates globally. Its Culture Shaping segment operates in the Americas and Europe. In addition to executive search, it provides leadership consulting expertise and culture shaping services including executive leadership assessment; leadership, team and board development; succession planning; talent strategy; people performance; inter-team collaboration, and organizational transformation.

FINANCIAL RATIOS  of  Heidrick&Struggles International (HSII)

Valuation Ratios
P/E Ratio 32.5
Price to Sales 0.8
Price to Book 1.9
Price to Tangible Book
Price to Cash Flow 19.5
Price to Free Cash Flow 24.4
Growth Rates
Sales Growth Rate 9.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -68.8%
Cap. Spend. - 3 Yr. Gr. Rate 4.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 2.6%
Ret/ On Assets - 3 Yr. Avg. 2.3%
Return On Total Capital 5.8%
Ret/ On T. Cap. - 3 Yr. Avg. 4.9%
Return On Equity 5.8%
Return On Equity - 3 Yr. Avg. 5.2%
Asset Turnover 1
Profitability Ratios
Gross Margin 96.8%
Gross Margin - 3 Yr. Avg. 96.7%
EBITDA Margin 9%
EBITDA Margin - 3 Yr. Avg. 8.4%
Operating Margin 5.8%
Oper. Margin - 3 Yr. Avg. 5.7%
Pre-Tax Margin 6.3%
Pre-Tax Margin - 3 Yr. Avg. 5.6%
Net Profit Margin 2.5%
Net Profit Margin - 3 Yr. Avg. 2.3%
Effective Tax Rate 60.5%
Eff/ Tax Rate - 3 Yr. Avg. 59.4%
Payout Ratio 66.7%

HSII stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HSII stock intrinsic value calculation we used $601 million for the last fiscal year's total revenue generated by Heidrick&Struggles International. The default revenue input number comes from 2016 income statement of Heidrick&Struggles 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 HSII stock valuation model: a) initial revenue growth rate of 10.8% 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 HSII is calculated based on our internal credit rating of Heidrick&Struggles 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 Heidrick&Struggles 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 HSII stock the variable cost ratio is equal to 93.8%.

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 HSII 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 Heidrick&Struggles International.

Corporate tax rate of 27% is the nominal tax rate for Heidrick&Struggles 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 HSII 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 HSII are equal to 9.2%.

Life of production assets of 12.3 years is the average useful life of capital assets used in Heidrick&Struggles 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 HSII is equal to -14.6%. 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 - $259 million for Heidrick&Struggles 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 18.633 million for Heidrick&Struggles 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 Heidrick&Struggles International at the current share price and the inputted number of shares is $0.5 billion.

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COMPANY NEWS

▶ [$$] Employee Mentorship Program Gets a Reboot   [Dec-28-17 12:40AM  The Wall Street Journal]
▶ [$$] Fundraising Boom Gives Junior Talent the Upper Hand   [Nov-28-17 07:00AM  The Wall Street Journal]
▶ Heidrick & Struggles tops Street 3Q forecasts   [Oct-26-17 05:31PM  Associated Press]
▶ Heidrick & Struggles Declares Quarterly Cash Dividend   [Oct-24-17 11:36AM  PR Newswire]
▶ Heidrick & Struggles Commits to Paradigm for Parity┬«   [Aug-24-17 08:00AM  PR Newswire]
▶ [$$] Avon CEO to Step Down Amid Investor Pressure   [Aug-04-17 12:19AM  The Wall Street Journal]
▶ [$$] Avon CEO to Step Down Amid Activist Investor Pressure   [Aug-03-17 06:18PM  The Wall Street Journal]
▶ Heidrick & Struggles Declares Quarterly Cash Dividend   [Jul-25-17 10:27AM  PR Newswire]
▶ Heidrick & Struggles reports 2Q loss   [Jul-24-17 09:26PM  Associated Press]
▶ [$$] Avon chief Sheri McCoy to step down   [Jun-15-17 03:22PM  Financial Times]
▶ [$$] Industry Data   [May-01-17 09:32AM  The Wall Street Journal]
▶ New Strong Buy Stocks for April 28th   [Apr-28-17 10:10AM  Zacks]
▶ Heidrick & Struggles misses Street 1Q forecasts   [Apr-24-17 04:21PM  Associated Press]
▶ Differences Emerge in CEOs' Route to the Top   [Apr-20-17 04:00AM  PR Newswire]
▶ Mondelez lays groundwork to replace its CEO -WSJ   [Apr-09-17 04:38PM  Reuters]
▶ [$$] Asian PE Compensation Growth Slows   [Apr-05-17 10:46AM  The Wall Street Journal]
Financial statements of HSII
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