Intrinsic value of Hudson Global - HSON

Previous Close

$1.70

  Intrinsic Value

$16.16

stock screener

  Rating & Target

str. buy

+850%

Previous close

$1.70

 
Intrinsic value

$16.16

 
Up/down potential

+850%

 
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 2017), $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 0.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  8.00
  7.70
  7.43
  7.19
  6.97
  6.77
  6.59
  6.43
  6.29
  6.16
  6.05
  5.94
  5.85
  5.76
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.36
  5.33
  5.30
  5.27
  5.24
  5.22
  5.19
  5.17
  5.16
  5.14
Revenue, $m
  494
  532
  571
  612
  655
  699
  745
  793
  843
  895
  949
  1,005
  1,064
  1,126
  1,190
  1,256
  1,326
  1,399
  1,475
  1,555
  1,639
  1,726
  1,817
  1,913
  2,013
  2,118
  2,228
  2,344
  2,464
  2,591
Variable operating expenses, $m
  380
  409
  439
  471
  504
  538
  573
  610
  648
  688
  730
  773
  818
  866
  915
  966
  1,020
  1,076
  1,135
  1,196
  1,260
  1,327
  1,398
  1,471
  1,548
  1,629
  1,714
  1,802
  1,895
  1,993
Fixed operating expenses, $m
  109
  112
  114
  117
  119
  122
  125
  127
  130
  133
  136
  139
  142
  145
  148
  152
  155
  158
  162
  165
  169
  173
  177
  180
  184
  188
  193
  197
  201
  206
Total operating expenses, $m
  489
  521
  553
  588
  623
  660
  698
  737
  778
  821
  866
  912
  960
  1,011
  1,063
  1,118
  1,175
  1,234
  1,297
  1,361
  1,429
  1,500
  1,575
  1,651
  1,732
  1,817
  1,907
  1,999
  2,096
  2,199
Operating income, $m
  5
  11
  18
  25
  32
  40
  48
  56
  65
  74
  83
  93
  104
  115
  127
  139
  151
  165
  179
  194
  210
  226
  243
  262
  281
  301
  322
  345
  368
  393
EBITDA, $m
  5
  12
  19
  26
  33
  41
  49
  57
  66
  75
  85
  95
  105
  117
  128
  141
  153
  167
  181
  196
  212
  229
  246
  264
  284
  304
  326
  348
  372
  397
Interest expense (income), $m
  0
  0
  1
  1
  1
  2
  2
  2
  3
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  9
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
Earnings before tax, $m
  4
  10
  17
  23
  30
  38
  45
  53
  62
  70
  79
  89
  99
  110
  121
  132
  145
  158
  171
  185
  200
  216
  233
  250
  269
  288
  308
  330
  353
  376
Tax expense, $m
  1
  3
  5
  6
  8
  10
  12
  14
  17
  19
  21
  24
  27
  30
  33
  36
  39
  43
  46
  50
  54
  58
  63
  68
  73
  78
  83
  89
  95
  102
Net income, $m
  3
  8
  12
  17
  22
  27
  33
  39
  45
  51
  58
  65
  72
  80
  88
  97
  106
  115
  125
  135
  146
  158
  170
  183
  196
  210
  225
  241
  257
  275

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
  121
  130
  140
  150
  160
  171
  182
  194
  206
  219
  232
  246
  260
  275
  291
  307
  324
  342
  361
  380
  401
  422
  444
  468
  492
  518
  545
  573
  602
  633
Adjusted assets (=assets-cash), $m
  121
  130
  140
  150
  160
  171
  182
  194
  206
  219
  232
  246
  260
  275
  291
  307
  324
  342
  361
  380
  401
  422
  444
  468
  492
  518
  545
  573
  602
  633
Revenue / Adjusted assets
  4.083
  4.092
  4.079
  4.080
  4.094
  4.088
  4.093
  4.088
  4.092
  4.087
  4.091
  4.085
  4.092
  4.095
  4.089
  4.091
  4.093
  4.091
  4.086
  4.092
  4.087
  4.090
  4.092
  4.088
  4.091
  4.089
  4.088
  4.091
  4.093
  4.093
Average production assets, $m
  7
  8
  9
  9
  10
  10
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32
  33
  35
  37
  39
Working capital, $m
  -7
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -37
  -39
Total debt, $m
  12
  18
  24
  30
  37
  43
  50
  57
  65
  73
  81
  89
  98
  107
  117
  127
  137
  148
  160
  171
  184
  197
  211
  225
  240
  256
  272
  290
  308
  327
Total liabilities, $m
  74
  80
  86
  92
  98
  105
  112
  119
  126
  134
  142
  151
  159
  169
  178
  188
  199
  210
  221
  233
  246
  259
  272
  287
  302
  317
  334
  351
  369
  388
Total equity, $m
  47
  50
  54
  58
  62
  66
  70
  75
  80
  85
  90
  95
  101
  106
  113
  119
  125
  132
  140
  147
  155
  163
  172
  181
  190
  200
  211
  222
  233
  245
Total liabilities and equity, $m
  121
  130
  140
  150
  160
  171
  182
  194
  206
  219
  232
  246
  260
  275
  291
  307
  324
  342
  361
  380
  401
  422
  444
  468
  492
  517
  545
  573
  602
  633
Debt-to-equity ratio
  0.270
  0.360
  0.440
  0.520
  0.590
  0.650
  0.710
  0.760
  0.810
  0.860
  0.900
  0.940
  0.970
  1.010
  1.040
  1.070
  1.090
  1.120
  1.140
  1.170
  1.190
  1.210
  1.230
  1.240
  1.260
  1.280
  1.290
  1.310
  1.320
  1.330
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
  3
  8
  12
  17
  22
  27
  33
  39
  45
  51
  58
  65
  72
  80
  88
  97
  106
  115
  125
  135
  146
  158
  170
  183
  196
  210
  225
  241
  257
  275
Depreciation, amort., depletion, $m
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
Funds from operations, $m
  4
  8
  13
  18
  23
  28
  34
  40
  46
  53
  59
  66
  74
  82
  90
  99
  108
  117
  127
  138
  149
  160
  173
  185
  199
  213
  228
  244
  261
  279
Change in working capital, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
Cash from operations, $m
  4
  9
  14
  19
  24
  29
  35
  41
  47
  53
  60
  67
  75
  83
  91
  100
  109
  118
  128
  139
  150
  162
  174
  187
  201
  215
  230
  246
  263
  281
Maintenance CAPEX, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
New CAPEX, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
Cash from investing activities, $m
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
Free cash flow, $m
  3
  8
  12
  17
  22
  28
  33
  39
  45
  51
  58
  65
  72
  80
  88
  97
  106
  115
  125
  135
  146
  158
  170
  183
  196
  210
  225
  241
  258
  275
Issuance/(repayment) of debt, $m
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
Issuance/(repurchase) of shares, $m
  1
  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  
  6
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
Total cash flow (excl. dividends), $m
  9
  13
  18
  23
  29
  34
  40
  46
  52
  59
  66
  73
  81
  89
  98
  107
  116
  126
  136
  147
  159
  171
  184
  197
  211
  226
  242
  258
  276
  294
Retained Cash Flow (-), $m
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
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
  1
  1
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
Cash available for distribution, $m
  5
  10
  14
  19
  25
  30
  36
  42
  48
  54
  61
  68
  76
  84
  92
  100
  110
  119
  129
  140
  151
  163
  175
  188
  202
  216
  231
  247
  264
  282
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
  5
  9
  13
  16
  19
  22
  24
  26
  27
  28
  29
  29
  29
  28
  27
  26
  24
  22
  20
  18
  16
  13
  11
  10
  8
  6
  5
  4
  3
  2
Current shareholders' claim on cash, %
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0
  99.0

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 -6
Price to Sales 0.1
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow -6
Price to Free Cash Flow -4.5
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 $457 million for the last fiscal year's total revenue generated by Hudson Global. The default revenue input number comes from 2017 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 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 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 76.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $107 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 5.4% 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 0.3%.

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 1.5%.

Life of production assets of 10 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 -1.5%. 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 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 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 $0.1 billion.

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COMPANY NEWS

▶ 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]
▶ Hudson Global Schedules Conference Call and Webcast   [Apr-20-16 07:00AM  GlobeNewswire]
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