Intrinsic value of Hudson Global - HSON

Previous Close

$1.45

  Intrinsic Value

$46.23

stock screener

  Rating & Target

str. buy

+999%

Previous close

$1.45

 
Intrinsic value

$46.23

 
Up/down potential

+999%

 
Rating

str. buy

We calculate the intrinsic value of HSON 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 0.0

 

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, %
  17.20
  15.98
  14.88
  13.89
  13.00
  12.20
  11.48
  10.84
  10.25
  9.73
  9.25
  8.83
  8.45
  8.10
  7.79
  7.51
  7.26
  7.03
  6.83
  6.65
  6.48
  6.33
  6.20
  6.08
  5.97
  5.88
  5.79
  5.71
  5.64
  5.57
Revenue, $m
  535
  621
  713
  812
  918
  1,030
  1,148
  1,273
  1,403
  1,540
  1,682
  1,831
  1,985
  2,146
  2,313
  2,487
  2,667
  2,855
  3,050
  3,253
  3,464
  3,683
  3,912
  4,150
  4,397
  4,656
  4,925
  5,207
  5,500
  5,807
Variable operating expenses, $m
  407
  472
  543
  618
  699
  784
  874
  968
  1,068
  1,172
  1,280
  1,393
  1,511
  1,633
  1,760
  1,893
  2,030
  2,173
  2,321
  2,476
  2,636
  2,803
  2,977
  3,158
  3,346
  3,543
  3,748
  3,962
  4,186
  4,419
Fixed operating expenses, $m
  112
  115
  117
  120
  123
  125
  128
  131
  134
  137
  140
  143
  146
  149
  152
  156
  159
  163
  166
  170
  174
  178
  181
  185
  190
  194
  198
  202
  207
  211
Total operating expenses, $m
  519
  587
  660
  738
  822
  909
  1,002
  1,099
  1,202
  1,309
  1,420
  1,536
  1,657
  1,782
  1,912
  2,049
  2,189
  2,336
  2,487
  2,646
  2,810
  2,981
  3,158
  3,343
  3,536
  3,737
  3,946
  4,164
  4,393
  4,630
Operating income, $m
  16
  33
  53
  74
  97
  121
  146
  173
  202
  231
  262
  295
  328
  364
  400
  439
  478
  520
  563
  607
  654
  703
  753
  806
  861
  919
  979
  1,042
  1,108
  1,176
EBITDA, $m
  16
  34
  54
  75
  98
  122
  148
  175
  204
  234
  265
  298
  332
  367
  404
  443
  483
  524
  568
  613
  660
  709
  760
  813
  869
  927
  987
  1,050
  1,117
  1,186
Interest expense (income), $m
  0
  0
  1
  3
  4
  6
  7
  9
  11
  13
  15
  17
  19
  21
  24
  26
  29
  32
  34
  37
  40
  44
  47
  50
  54
  57
  61
  65
  70
  74
  79
Earnings before tax, $m
  16
  32
  50
  70
  91
  114
  137
  162
  189
  216
  245
  276
  307
  340
  374
  410
  447
  485
  525
  567
  611
  656
  703
  753
  804
  858
  914
  972
  1,034
  1,098
Tax expense, $m
  4
  9
  14
  19
  25
  31
  37
  44
  51
  58
  66
  74
  83
  92
  101
  111
  121
  131
  142
  153
  165
  177
  190
  203
  217
  232
  247
  263
  279
  296
Net income, $m
  11
  24
  37
  51
  67
  83
  100
  119
  138
  158
  179
  201
  224
  248
  273
  299
  326
  354
  383
  414
  446
  479
  513
  549
  587
  626
  667
  710
  755
  802

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
  131
  152
  174
  198
  224
  252
  280
  311
  343
  376
  411
  447
  485
  524
  565
  607
  652
  697
  745
  795
  846
  900
  955
  1,014
  1,074
  1,137
  1,203
  1,272
  1,343
  1,418
Adjusted assets (=assets-cash), $m
  131
  152
  174
  198
  224
  252
  280
  311
  343
  376
  411
  447
  485
  524
  565
  607
  652
  697
  745
  795
  846
  900
  955
  1,014
  1,074
  1,137
  1,203
  1,272
  1,343
  1,418
Revenue / Adjusted assets
  4.084
  4.086
  4.098
  4.101
  4.098
  4.087
  4.100
  4.093
  4.090
  4.096
  4.092
  4.096
  4.093
  4.095
  4.094
  4.097
  4.090
  4.096
  4.094
  4.092
  4.095
  4.092
  4.096
  4.093
  4.094
  4.095
  4.094
  4.094
  4.095
  4.095
Average production assets, $m
  4
  5
  6
  6
  7
  8
  9
  10
  11
  12
  13
  15
  16
  17
  19
  20
  21
  23
  24
  26
  28
  29
  31
  33
  35
  37
  39
  42
  44
  46
Working capital, $m
  36
  42
  48
  55
  62
  70
  78
  87
  95
  105
  114
  124
  135
  146
  157
  169
  181
  194
  207
  221
  236
  250
  266
  282
  299
  317
  335
  354
  374
  395
Total debt, $m
  12
  24
  38
  53
  69
  86
  103
  122
  142
  162
  183
  206
  229
  253
  278
  304
  331
  359
  388
  419
  450
  483
  517
  553
  590
  629
  669
  711
  755
  801
Total liabilities, $m
  80
  93
  107
  122
  137
  154
  172
  191
  210
  231
  252
  274
  297
  321
  346
  372
  399
  428
  457
  487
  519
  552
  586
  621
  658
  697
  737
  780
  824
  869
Total equity, $m
  51
  59
  67
  77
  87
  97
  109
  120
  133
  146
  159
  173
  188
  203
  219
  235
  252
  270
  288
  307
  327
  348
  370
  392
  416
  440
  466
  492
  520
  549
Total liabilities and equity, $m
  131
  152
  174
  199
  224
  251
  281
  311
  343
  377
  411
  447
  485
  524
  565
  607
  651
  698
  745
  794
  846
  900
  956
  1,013
  1,074
  1,137
  1,203
  1,272
  1,344
  1,418
Debt-to-equity ratio
  0.230
  0.420
  0.570
  0.690
  0.790
  0.880
  0.950
  1.010
  1.070
  1.110
  1.150
  1.190
  1.220
  1.250
  1.270
  1.290
  1.310
  1.330
  1.350
  1.360
  1.370
  1.390
  1.400
  1.410
  1.420
  1.430
  1.440
  1.440
  1.450
  1.460
Adjusted equity ratio
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  11
  24
  37
  51
  67
  83
  100
  119
  138
  158
  179
  201
  224
  248
  273
  299
  326
  354
  383
  414
  446
  479
  513
  549
  587
  626
  667
  710
  755
  802
Depreciation, amort., depletion, $m
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
Funds from operations, $m
  12
  25
  38
  53
  68
  85
  102
  121
  140
  161
  182
  204
  227
  252
  277
  303
  330
  359
  388
  419
  451
  485
  520
  556
  594
  634
  675
  718
  763
  811
Change in working capital, $m
  5
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
Cash from operations, $m
  7
  19
  32
  46
  61
  77
  94
  112
  131
  151
  172
  194
  217
  241
  265
  291
  318
  346
  375
  405
  437
  470
  504
  540
  577
  616
  657
  699
  744
  790
Maintenance CAPEX, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
New CAPEX, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
Cash from investing activities, $m
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
Free cash flow, $m
  5
  17
  30
  44
  59
  75
  92
  109
  128
  148
  169
  190
  213
  236
  261
  286
  313
  340
  369
  399
  430
  463
  496
  532
  568
  607
  647
  689
  733
  779
Issuance/(repayment) of debt, $m
  12
  13
  14
  15
  16
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  34
  36
  37
  39
  40
  42
  44
  46
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  
  12
  13
  14
  15
  16
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  34
  36
  37
  39
  40
  42
  44
  46
Total cash flow (excl. dividends), $m
  17
  30
  44
  59
  75
  91
  109
  128
  148
  168
  190
  212
  236
  260
  286
  312
  340
  368
  398
  429
  462
  495
  531
  567
  606
  646
  687
  731
  777
  825
Retained Cash Flow (-), $m
  -7
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -22
  -23
  -24
  -25
  -27
  -28
  -29
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
  10
  22
  35
  49
  65
  81
  98
  116
  135
  155
  176
  198
  221
  245
  270
  296
  323
  351
  380
  410
  442
  475
  509
  545
  582
  621
  662
  705
  749
  796
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
  9
  20
  31
  41
  50
  59
  66
  73
  78
  81
  84
  85
  84
  82
  79
  75
  70
  65
  58
  52
  46
  39
  33
  28
  23
  18
  14
  11
  8
  6
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

Hudson Global, Inc. (Hudson) is a provider of professional-level recruitment and related talent solutions across the world. The Company's segments include Hudson Americas, Hudson Asia Pacific and Hudson Europe. Its service offerings include Permanent Recruitment, Temporary Contracting, Recruitment Process Outsourcing (RPO) and Talent Management solutions. The Permanent Recruitment services leverage its consultants, supported by its specialists in the delivery of its methods to identify, select and engage the talent. In Temporary Contracting, Hudson provides a range of project management, interim management and professional contract staffing services. Hudson RPO services include complete recruitment outsourcing, project-based outsourcing, contingent workforce solutions and recruitment consulting. Its Talent Management Solutions' capability encompasses services, such as talent assessment, interview training, executive coaching, employee development and outplacement.

FINANCIAL RATIOS  of  Hudson Global (HSON)

Valuation Ratios
P/E Ratio -5.1
Price to Sales 0.1
Price to Book 1.1
Price to Tangible Book
Price to Cash Flow -5.1
Price to Free Cash Flow -3.8
Growth Rates
Sales Growth Rate -8.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate 0%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 19%
Interest Coverage 0
Management Effectiveness
Return On Assets -7.9%
Ret/ On Assets - 3 Yr. Avg. -5%
Return On Total Capital -15.9%
Ret/ On T. Cap. - 3 Yr. Avg. -10.7%
Return On Equity -17.5%
Return On Equity - 3 Yr. Avg. -11.2%
Asset Turnover 3.7
Profitability Ratios
Gross Margin 41.1%
Gross Margin - 3 Yr. Avg. 40%
EBITDA Margin -1.2%
EBITDA Margin - 3 Yr. Avg. -0.7%
Operating Margin -1.7%
Oper. Margin - 3 Yr. Avg. -1.4%
Pre-Tax Margin -1.9%
Pre-Tax Margin - 3 Yr. Avg. -1.5%
Net Profit Margin -2.1%
Net Profit Margin - 3 Yr. Avg. -1.3%
Effective Tax Rate -12.5%
Eff/ Tax Rate - 3 Yr. Avg. -0.5%
Payout Ratio -33.3%

HSON stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HSON stock intrinsic value calculation we used $456.721 million for the last fiscal year's total revenue generated by Hudson Global. The default revenue input number comes from 0001 income statement of Hudson Global. 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 HSON stock valuation model: a) initial revenue growth rate of 17.2% 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 4.3%, whose default value for HSON is calculated based on our internal credit rating of Hudson Global, 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 Hudson Global.
    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 HSON stock the variable cost ratio is equal to 76.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $110 million in the base year in the intrinsic value calculation for HSON 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 10.4% for Hudson Global.

Corporate tax rate of 27% is the nominal tax rate for Hudson Global. 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 HSON 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 HSON are equal to 0.8%.

Life of production assets of 1.3 years is the average useful life of capital assets used in Hudson Global 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 HSON is equal to 6.8%. 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 - $43.152 million for Hudson Global - 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 32.031 million for Hudson Global 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 Hudson Global at the current share price and the inputted number of shares is $0.0 billion.

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COMPANY NEWS

▶ Hudson Global: 3Q Earnings Snapshot   [Nov-01-18 10:14AM  Associated Press]
▶ Hudson Global Schedules Conference Call and Webcast   [Oct-25-18 09:15AM  GlobeNewswire]
▶ Hudson Global: 2Q Earnings Snapshot   [Aug-02-18 08:05AM  Associated Press]
▶ Hudson Global Schedules Conference Call and Webcast   [Jul-26-18 07:06AM  GlobeNewswire]
▶ Hudson Global: 1Q Earnings Snapshot   [07:20AM  Associated Press]
▶ Hudson Global Schedules Conference Call and Webcast   [May-02-18 07:00AM  GlobeNewswire]
▶ Hudson Global reports 4Q loss   [09:06AM  Associated Press]
▶ Hudson Global Schedules Conference Call and Webcast   [Feb-15-18 07:00AM  GlobeNewswire]
▶ Hudson Global reports 3Q loss   [Nov-02-17 10:19AM  Associated Press]
▶ Hudson Global Schedules Conference Call and Webcast   [Oct-26-17 07:00AM  GlobeNewswire]
▶ Hudson Global posts 2Q profit   [Aug-03-17 11:08PM  Associated Press]
▶ Hudson Global Schedules Conference Call and Webcast   [Jul-26-17 07:00AM  GlobeNewswire]
▶ Hudson Global reports 1Q loss   [May-04-17 08:11AM  Associated Press]
▶ Hudson Global Schedules Conference Call and Webcast   [Apr-27-17 07:00AM  GlobeNewswire]
▶ Hudson Global reports 4Q loss   [07:17AM  Associated Press]
▶ Hudson Global Schedules Conference Call and Webcast   [Feb-21-17 05:00PM  GlobeNewswire]
▶ Hudson Global Schedules Conference Call and Webcast   [Oct-20-16 07:00AM  GlobeNewswire]
▶ Hudson Global Schedules Conference Call and Webcast   [Jul-21-16 07:00AM  GlobeNewswire]

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