Intrinsic value of Heidrick & Struggles International, Inc. - HSII

Previous Close

$33.14

  Intrinsic Value

$225.35

stock screener

  Rating & Target

str. buy

+580%

Previous close

$33.14

 
Intrinsic value

$225.35

 
Up/down potential

+580%

 
Rating

str. buy

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

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 0.6

 

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, %
  9.60
  9.14
  8.73
  8.35
  8.02
  7.72
  7.44
  7.20
  6.98
  6.78
  6.60
  6.44
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
Revenue, $m
  807
  880
  957
  1,037
  1,120
  1,207
  1,297
  1,390
  1,487
  1,588
  1,693
  1,802
  1,915
  2,033
  2,156
  2,285
  2,418
  2,558
  2,703
  2,855
  3,014
  3,180
  3,354
  3,535
  3,725
  3,923
  4,131
  4,349
  4,576
  4,815
Variable operating expenses, $m
  167
  182
  198
  214
  231
  249
  267
  286
  306
  326
  344
  366
  390
  414
  439
  465
  492
  520
  550
  581
  613
  647
  682
  719
  758
  798
  840
  884
  931
  979
Fixed operating expenses, $m
  558
  570
  583
  596
  609
  622
  636
  650
  664
  679
  694
  709
  725
  740
  757
  773
  790
  808
  826
  844
  862
  881
  901
  920
  941
  961
  983
  1,004
  1,026
  1,049
Total operating expenses, $m
  725
  752
  781
  810
  840
  871
  903
  936
  970
  1,005
  1,038
  1,075
  1,115
  1,154
  1,196
  1,238
  1,282
  1,328
  1,376
  1,425
  1,475
  1,528
  1,583
  1,639
  1,699
  1,759
  1,823
  1,888
  1,957
  2,028
Operating income, $m
  81
  128
  176
  227
  280
  336
  394
  454
  517
  583
  655
  726
  801
  879
  961
  1,047
  1,136
  1,230
  1,328
  1,431
  1,539
  1,652
  1,771
  1,895
  2,026
  2,164
  2,308
  2,460
  2,619
  2,787
EBITDA, $m
  93
  140
  190
  241
  295
  352
  411
  472
  536
  603
  672
  745
  821
  901
  984
  1,071
  1,161
  1,257
  1,356
  1,461
  1,570
  1,685
  1,806
  1,932
  2,065
  2,205
  2,351
  2,505
  2,667
  2,837
Interest expense (income), $m
  0
  0
  2
  5
  7
  10
  12
  15
  18
  21
  24
  27
  30
  34
  38
  41
  45
  49
  54
  58
  63
  67
  73
  78
  83
  89
  95
  101
  108
  115
  122
Earnings before tax, $m
  81
  125
  172
  220
  271
  324
  379
  436
  496
  559
  628
  696
  767
  842
  920
  1,001
  1,087
  1,176
  1,270
  1,368
  1,471
  1,579
  1,693
  1,812
  1,937
  2,069
  2,207
  2,352
  2,504
  2,665
Tax expense, $m
  22
  34
  46
  59
  73
  87
  102
  118
  134
  151
  169
  188
  207
  227
  248
  270
  293
  318
  343
  369
  397
  426
  457
  489
  523
  559
  596
  635
  676
  719
Net income, $m
  59
  92
  125
  161
  198
  236
  276
  318
  362
  408
  458
  508
  560
  615
  671
  731
  793
  859
  927
  999
  1,074
  1,153
  1,236
  1,323
  1,414
  1,510
  1,611
  1,717
  1,828
  1,945

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
  768
  838
  912
  988
  1,067
  1,149
  1,235
  1,324
  1,416
  1,512
  1,612
  1,716
  1,824
  1,937
  2,054
  2,176
  2,303
  2,436
  2,575
  2,719
  2,871
  3,029
  3,194
  3,367
  3,547
  3,736
  3,934
  4,141
  4,358
  4,586
Adjusted assets (=assets-cash), $m
  768
  838
  912
  988
  1,067
  1,149
  1,235
  1,324
  1,416
  1,512
  1,612
  1,716
  1,824
  1,937
  2,054
  2,176
  2,303
  2,436
  2,575
  2,719
  2,871
  3,029
  3,194
  3,367
  3,547
  3,736
  3,934
  4,141
  4,358
  4,586
Revenue / Adjusted assets
  1.051
  1.050
  1.049
  1.050
  1.050
  1.050
  1.050
  1.050
  1.050
  1.050
  1.050
  1.050
  1.050
  1.050
  1.050
  1.050
  1.050
  1.050
  1.050
  1.050
  1.050
  1.050
  1.050
  1.050
  1.050
  1.050
  1.050
  1.050
  1.050
  1.050
Average production assets, $m
  107
  117
  127
  138
  149
  161
  172
  185
  198
  211
  225
  240
  255
  270
  287
  304
  322
  340
  360
  380
  401
  423
  446
  470
  495
  522
  549
  578
  609
  640
Working capital, $m
  -162
  -177
  -192
  -208
  -225
  -243
  -261
  -279
  -299
  -319
  -340
  -362
  -385
  -409
  -433
  -459
  -486
  -514
  -543
  -574
  -606
  -639
  -674
  -711
  -749
  -789
  -830
  -874
  -920
  -968
Total debt, $m
  42
  86
  131
  178
  227
  278
  331
  386
  443
  503
  564
  629
  696
  765
  838
  913
  992
  1,074
  1,160
  1,250
  1,343
  1,441
  1,543
  1,650
  1,762
  1,879
  2,002
  2,130
  2,264
  2,405
Total liabilities, $m
  476
  519
  564
  611
  660
  711
  764
  819
  877
  936
  998
  1,062
  1,129
  1,199
  1,271
  1,347
  1,426
  1,508
  1,594
  1,683
  1,777
  1,875
  1,977
  2,084
  2,196
  2,313
  2,435
  2,564
  2,698
  2,839
Total equity, $m
  293
  319
  347
  376
  407
  438
  470
  504
  540
  576
  614
  654
  695
  738
  783
  829
  878
  928
  981
  1,036
  1,094
  1,154
  1,217
  1,283
  1,351
  1,424
  1,499
  1,578
  1,661
  1,747
Total liabilities and equity, $m
  769
  838
  911
  987
  1,067
  1,149
  1,234
  1,323
  1,417
  1,512
  1,612
  1,716
  1,824
  1,937
  2,054
  2,176
  2,304
  2,436
  2,575
  2,719
  2,871
  3,029
  3,194
  3,367
  3,547
  3,737
  3,934
  4,142
  4,359
  4,586
Debt-to-equity ratio
  0.140
  0.270
  0.380
  0.470
  0.560
  0.630
  0.700
  0.770
  0.820
  0.870
  0.920
  0.960
  1.000
  1.040
  1.070
  1.100
  1.130
  1.160
  1.180
  1.210
  1.230
  1.250
  1.270
  1.290
  1.300
  1.320
  1.340
  1.350
  1.360
  1.380
Adjusted equity ratio
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  59
  92
  125
  161
  198
  236
  276
  318
  362
  408
  458
  508
  560
  615
  671
  731
  793
  859
  927
  999
  1,074
  1,153
  1,236
  1,323
  1,414
  1,510
  1,611
  1,717
  1,828
  1,945
Depreciation, amort., depletion, $m
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  32
  33
  35
  37
  39
  41
  43
  46
  48
  50
Funds from operations, $m
  71
  104
  139
  175
  213
  252
  293
  336
  381
  428
  476
  527
  580
  636
  694
  755
  819
  885
  955
  1,029
  1,106
  1,186
  1,271
  1,360
  1,453
  1,551
  1,654
  1,762
  1,876
  1,996
Change in working capital, $m
  -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
  -44
  -46
  -48
Cash from operations, $m
  85
  119
  154
  191
  229
  270
  311
  355
  401
  448
  497
  549
  603
  660
  719
  781
  846
  914
  985
  1,059
  1,138
  1,220
  1,306
  1,396
  1,491
  1,591
  1,696
  1,806
  1,922
  2,044
Maintenance CAPEX, $m
  -8
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -27
  -28
  -30
  -32
  -33
  -35
  -37
  -39
  -41
  -43
  -46
  -48
New CAPEX, $m
  -9
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -30
  -32
Cash from investing activities, $m
  -17
  -18
  -19
  -21
  -22
  -23
  -25
  -26
  -28
  -29
  -31
  -33
  -34
  -36
  -37
  -40
  -42
  -44
  -46
  -48
  -51
  -54
  -56
  -59
  -62
  -65
  -69
  -72
  -76
  -80
Free cash flow, $m
  68
  101
  135
  170
  208
  246
  287
  329
  373
  419
  466
  517
  569
  624
  681
  741
  804
  870
  939
  1,011
  1,087
  1,166
  1,249
  1,337
  1,429
  1,526
  1,627
  1,734
  1,846
  1,964
Issuance/(repayment) of debt, $m
  42
  43
  45
  47
  49
  51
  53
  55
  57
  59
  62
  64
  67
  70
  73
  76
  79
  82
  86
  90
  94
  98
  102
  107
  112
  117
  123
  128
  134
  141
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  
  42
  43
  45
  47
  49
  51
  53
  55
  57
  59
  62
  64
  67
  70
  73
  76
  79
  82
  86
  90
  94
  98
  102
  107
  112
  117
  123
  128
  134
  141
Total cash flow (excl. dividends), $m
  110
  144
  180
  217
  257
  297
  340
  384
  430
  479
  528
  581
  636
  693
  754
  817
  883
  952
  1,024
  1,100
  1,180
  1,264
  1,352
  1,444
  1,541
  1,643
  1,750
  1,862
  1,980
  2,105
Retained Cash Flow (-), $m
  -26
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -35
  -37
  -38
  -40
  -41
  -43
  -45
  -47
  -49
  -51
  -53
  -55
  -58
  -60
  -63
  -66
  -69
  -72
  -75
  -79
  -83
  -87
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
  85
  117
  152
  188
  226
  266
  307
  350
  395
  442
  490
  541
  595
  651
  709
  770
  834
  901
  972
  1,045
  1,123
  1,204
  1,289
  1,378
  1,472
  1,571
  1,674
  1,783
  1,898
  2,018
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
  81
  107
  132
  155
  175
  193
  208
  219
  227
  232
  233
  231
  226
  218
  208
  196
  182
  166
  150
  133
  116
  100
  84
  70
  57
  46
  36
  28
  21
  15
Current shareholders' claim on cash, %
  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, Inc. (HSII)

Valuation Ratios
P/E Ratio 41
Price to Sales 1
Price to Book 2.4
Price to Tangible Book
Price to Cash Flow 24.6
Price to Free Cash Flow 30.8
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 $736 million for the last fiscal year's total revenue generated by Heidrick & Struggles International, Inc.. The default revenue input number comes from 0001 income statement of Heidrick & Struggles International, Inc.. 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 9.6% 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, Inc., 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, Inc..
    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 20.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $546 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 5.4% for Heidrick & Struggles International, Inc..

Corporate tax rate of 27% is the nominal tax rate for Heidrick & Struggles International, Inc.. 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 13.3%.

Life of production assets of 12.7 years is the average useful life of capital assets used in Heidrick & Struggles International, Inc. 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 -20.1%. 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 - $267.156 million for Heidrick & Struggles International, Inc. - 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 18.984 million for Heidrick & Struggles International, Inc. 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, Inc. at the current share price and the inputted number of shares is $0.6 billion.

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