Intrinsic value of Huron Consulting Group - HURN

Previous Close

$47.35

  Intrinsic Value

$42.10

stock screener

  Rating & Target

hold

-11%

Previous close

$47.35

 
Intrinsic value

$42.10

 
Up/down potential

-11%

 
Rating

hold

We calculate the intrinsic value of HURN 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 1.0

 

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, %
  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
  824
  843
  865
  889
  916
  946
  978
  1,013
  1,050
  1,091
  1,134
  1,180
  1,229
  1,281
  1,336
  1,395
  1,457
  1,522
  1,591
  1,664
  1,742
  1,823
  1,909
  1,999
  2,094
  2,194
  2,300
  2,411
  2,528
  2,650
Variable operating expenses, $m
  746
  762
  779
  799
  821
  845
  872
  900
  931
  964
  928
  965
  1,005
  1,048
  1,093
  1,141
  1,192
  1,245
  1,302
  1,362
  1,425
  1,491
  1,562
  1,636
  1,713
  1,795
  1,882
  1,972
  2,068
  2,168
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
  746
  762
  779
  799
  821
  845
  872
  900
  931
  964
  928
  965
  1,005
  1,048
  1,093
  1,141
  1,192
  1,245
  1,302
  1,362
  1,425
  1,491
  1,562
  1,636
  1,713
  1,795
  1,882
  1,972
  2,068
  2,168
Operating income, $m
  78
  82
  85
  90
  95
  100
  106
  112
  119
  127
  206
  215
  223
  233
  243
  254
  265
  277
  289
  303
  317
  332
  347
  364
  381
  399
  418
  438
  460
  482
EBITDA, $m
  235
  241
  247
  254
  262
  270
  279
  289
  300
  312
  324
  337
  351
  366
  382
  398
  416
  435
  455
  475
  498
  521
  545
  571
  598
  627
  657
  689
  722
  757
Interest expense (income), $m
  6
  20
  21
  22
  22
  23
  24
  26
  27
  28
  30
  31
  33
  35
  37
  39
  41
  43
  46
  48
  51
  54
  57
  60
  63
  67
  70
  74
  78
  83
  87
Earnings before tax, $m
  58
  61
  64
  67
  71
  76
  80
  86
  91
  97
  175
  182
  189
  196
  204
  213
  222
  231
  241
  252
  263
  275
  287
  300
  314
  329
  344
  360
  377
  395
Tax expense, $m
  16
  16
  17
  18
  19
  20
  22
  23
  25
  26
  47
  49
  51
  53
  55
  57
  60
  62
  65
  68
  71
  74
  78
  81
  85
  89
  93
  97
  102
  107
Net income, $m
  42
  44
  47
  49
  52
  55
  59
  62
  66
  71
  128
  133
  138
  143
  149
  155
  162
  169
  176
  184
  192
  201
  210
  219
  229
  240
  251
  263
  275
  288

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
  1,058
  1,082
  1,110
  1,141
  1,176
  1,214
  1,255
  1,300
  1,348
  1,400
  1,455
  1,514
  1,577
  1,644
  1,715
  1,790
  1,870
  1,954
  2,043
  2,137
  2,236
  2,340
  2,450
  2,566
  2,688
  2,817
  2,952
  3,095
  3,245
  3,402
Adjusted assets (=assets-cash), $m
  1,058
  1,082
  1,110
  1,141
  1,176
  1,214
  1,255
  1,300
  1,348
  1,400
  1,455
  1,514
  1,577
  1,644
  1,715
  1,790
  1,870
  1,954
  2,043
  2,137
  2,236
  2,340
  2,450
  2,566
  2,688
  2,817
  2,952
  3,095
  3,245
  3,402
Revenue / Adjusted assets
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
Average production assets, $m
  855
  875
  898
  923
  951
  982
  1,015
  1,051
  1,090
  1,132
  1,177
  1,225
  1,275
  1,329
  1,387
  1,448
  1,512
  1,580
  1,652
  1,728
  1,808
  1,892
  1,981
  2,075
  2,174
  2,278
  2,387
  2,503
  2,624
  2,751
Working capital, $m
  -9
  -9
  -10
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -12
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
Total debt, $m
  353
  366
  380
  396
  414
  434
  455
  478
  503
  530
  558
  588
  621
  655
  692
  731
  771
  815
  861
  909
  960
  1,014
  1,070
  1,130
  1,193
  1,259
  1,329
  1,402
  1,480
  1,561
Total liabilities, $m
  545
  557
  572
  588
  606
  625
  646
  670
  694
  721
  749
  780
  812
  847
  883
  922
  963
  1,006
  1,052
  1,100
  1,151
  1,205
  1,262
  1,322
  1,385
  1,451
  1,520
  1,594
  1,671
  1,752
Total equity, $m
  513
  525
  538
  554
  570
  589
  609
  631
  654
  679
  706
  734
  765
  797
  832
  868
  907
  948
  991
  1,036
  1,084
  1,135
  1,188
  1,245
  1,304
  1,366
  1,432
  1,501
  1,574
  1,650
Total liabilities and equity, $m
  1,058
  1,082
  1,110
  1,142
  1,176
  1,214
  1,255
  1,301
  1,348
  1,400
  1,455
  1,514
  1,577
  1,644
  1,715
  1,790
  1,870
  1,954
  2,043
  2,136
  2,235
  2,340
  2,450
  2,567
  2,689
  2,817
  2,952
  3,095
  3,245
  3,402
Debt-to-equity ratio
  0.690
  0.700
  0.710
  0.720
  0.730
  0.740
  0.750
  0.760
  0.770
  0.780
  0.790
  0.800
  0.810
  0.820
  0.830
  0.840
  0.850
  0.860
  0.870
  0.880
  0.890
  0.890
  0.900
  0.910
  0.920
  0.920
  0.930
  0.930
  0.940
  0.950
Adjusted equity ratio
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  42
  44
  47
  49
  52
  55
  59
  62
  66
  71
  128
  133
  138
  143
  149
  155
  162
  169
  176
  184
  192
  201
  210
  219
  229
  240
  251
  263
  275
  288
Depreciation, amort., depletion, $m
  157
  159
  162
  164
  167
  170
  173
  177
  181
  185
  118
  122
  128
  133
  139
  145
  151
  158
  165
  173
  181
  189
  198
  208
  217
  228
  239
  250
  262
  275
Funds from operations, $m
  200
  204
  208
  213
  219
  225
  232
  239
  247
  256
  245
  255
  265
  276
  288
  300
  313
  327
  341
  357
  373
  390
  408
  427
  447
  468
  490
  513
  538
  563
Change in working capital, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
Cash from operations, $m
  200
  204
  208
  214
  219
  226
  232
  240
  248
  256
  246
  256
  266
  277
  288
  301
  314
  328
  342
  357
  374
  391
  409
  428
  448
  469
  491
  514
  539
  565
Maintenance CAPEX, $m
  -84
  -86
  -88
  -90
  -92
  -95
  -98
  -102
  -105
  -109
  -113
  -118
  -122
  -128
  -133
  -139
  -145
  -151
  -158
  -165
  -173
  -181
  -189
  -198
  -208
  -217
  -228
  -239
  -250
  -262
New CAPEX, $m
  -17
  -20
  -22
  -25
  -28
  -31
  -33
  -36
  -39
  -42
  -45
  -48
  -51
  -54
  -57
  -61
  -64
  -68
  -72
  -76
  -80
  -84
  -89
  -94
  -99
  -104
  -109
  -115
  -121
  -127
Cash from investing activities, $m
  -101
  -106
  -110
  -115
  -120
  -126
  -131
  -138
  -144
  -151
  -158
  -166
  -173
  -182
  -190
  -200
  -209
  -219
  -230
  -241
  -253
  -265
  -278
  -292
  -307
  -321
  -337
  -354
  -371
  -389
Free cash flow, $m
  99
  99
  98
  99
  99
  100
  101
  102
  104
  105
  88
  90
  93
  95
  98
  101
  105
  108
  112
  116
  121
  126
  131
  136
  141
  147
  154
  160
  167
  175
Issuance/(repayment) of debt, $m
  11
  13
  14
  16
  18
  20
  21
  23
  25
  27
  29
  30
  32
  34
  37
  39
  41
  43
  46
  48
  51
  54
  57
  60
  63
  66
  70
  73
  77
  81
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  
  11
  13
  14
  16
  18
  20
  21
  23
  25
  27
  29
  30
  32
  34
  37
  39
  41
  43
  46
  48
  51
  54
  57
  60
  63
  66
  70
  73
  77
  81
Total cash flow (excl. dividends), $m
  110
  111
  113
  115
  117
  119
  122
  125
  128
  132
  116
  121
  125
  130
  135
  140
  146
  152
  158
  165
  172
  179
  187
  196
  204
  214
  223
  234
  245
  256
Retained Cash Flow (-), $m
  -10
  -12
  -13
  -15
  -17
  -18
  -20
  -22
  -23
  -25
  -27
  -29
  -31
  -32
  -34
  -36
  -39
  -41
  -43
  -46
  -48
  -51
  -53
  -56
  -59
  -62
  -66
  -69
  -73
  -76
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
  15
  15
  15
  16
  16
  16
  17
  18
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  34
  36
  38
  39
  41
  43
  45
Cash available for distribution, $m
  100
  99
  99
  100
  100
  101
  102
  103
  105
  107
  90
  92
  94
  97
  100
  104
  107
  111
  115
  119
  124
  129
  134
  139
  145
  151
  158
  165
  172
  179
Discount rate, %
  6.00
  6.30
  6.62
  6.95
  7.29
  7.66
  8.04
  8.44
  8.86
  9.31
  9.77
  10.26
  10.78
  11.31
  11.88
  12.47
  13.10
  13.75
  14.44
  15.16
  15.92
  16.72
  17.55
  18.43
  19.35
  20.32
  21.33
  22.40
  23.52
  24.70
PV of cash for distribution, $m
  94
  88
  82
  76
  70
  65
  59
  54
  49
  44
  32
  28
  25
  22
  19
  16
  13
  11
  9
  7
  6
  4
  3
  2
  2
  1
  1
  1
  0
  0
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

Huron Consulting Group Inc. is a global professional services firm. The Company offers solutions in operations, advisory services, technology and analytics for healthcare, higher education, life sciences and commercial sectors. The Company's segments include Healthcare, Education and Life Sciences, and Business Advisory. Its Healthcare segment provides advisory services, from strategy setting through implementation, in the areas of organizational and resource alignment, clinical transformation, financial and operational performance, patient and caregiver engagement, and technology implementation and optimization. Its Education and Life Sciences segment provides management consulting and technology solutions to the higher education and academic medical centers, pharmaceutical and medical device, biotechnology and research industries. The Business Advisory segment's primary service lines include Enterprise Solutions and Analytics, and Business Advisory.

FINANCIAL RATIOS  of  Huron Consulting Group (HURN)

Valuation Ratios
P/E Ratio 27.1
Price to Sales 1.3
Price to Book 1.6
Price to Tangible Book
Price to Cash Flow 8
Price to Free Cash Flow 9.1
Growth Rates
Sales Growth Rate 3.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -21.1%
Cap. Spend. - 3 Yr. Gr. Rate -7.4%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 45.1%
Total Debt to Equity 45.1%
Interest Coverage 11
Management Effectiveness
Return On Assets 3.6%
Ret/ On Assets - 3 Yr. Avg. 5.8%
Return On Total Capital 4%
Ret/ On T. Cap. - 3 Yr. Avg. 6.6%
Return On Equity 5.8%
Return On Equity - 3 Yr. Avg. 9.7%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 34.3%
Gross Margin - 3 Yr. Avg. 34.9%
EBITDA Margin 14%
EBITDA Margin - 3 Yr. Avg. 16.7%
Operating Margin 9.3%
Oper. Margin - 3 Yr. Avg. 11.8%
Pre-Tax Margin 7.4%
Pre-Tax Margin - 3 Yr. Avg. 9.9%
Net Profit Margin 4.8%
Net Profit Margin - 3 Yr. Avg. 7.9%
Effective Tax Rate 33.9%
Eff/ Tax Rate - 3 Yr. Avg. 33.8%
Payout Ratio 0%

HURN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HURN stock intrinsic value calculation we used $808 million for the last fiscal year's total revenue generated by Huron Consulting Group. The default revenue input number comes from 2017 income statement of Huron Consulting Group. 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 HURN 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 6%, whose default value for HURN is calculated based on our internal credit rating of Huron Consulting Group, 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 Huron Consulting Group.
    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 HURN stock the variable cost ratio is equal to 90.7%.

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 HURN 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 5.9% for Huron Consulting Group.

Corporate tax rate of 27% is the nominal tax rate for Huron Consulting Group. 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 HURN stock is equal to 1.8%.

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 HURN are equal to 103.8%.

Life of production assets of 10 years is the average useful life of capital assets used in Huron Consulting Group 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 HURN is equal to -1.1%. 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 - $503 million for Huron Consulting Group - 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 21 million for Huron Consulting Group 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 Huron Consulting Group at the current share price and the inputted number of shares is $1.0 billion.

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COMPANY NEWS

▶ Huron Consulting: 2Q Earnings Snapshot   [Jul-31-18 05:36PM  Associated Press]
▶ Huron Consulting: 1Q Earnings Snapshot   [May-01-18 06:09PM  Associated Press]
▶ Huron Amends and Extends Senior Secured Credit Facility   [Mar-29-18 10:00AM  Business Wire]
▶ New Strong Sell Stocks for March 26th   [Mar-26-18 08:38AM  Zacks]
▶ New Strong Sell Stocks for March 20th   [Mar-20-18 09:53AM  Zacks]
▶ Huron Consulting reports 4Q loss   [05:04AM  Associated Press]
▶ Company Profile for Huron   [Feb-23-18 10:40AM  Business Wire]
▶ Hugh Sawyer Appointed to Huron Board of Directors   [Feb-12-18 09:05AM  Business Wire]
▶ Huron Announces 22 Senior-Level Promotions   [Feb-07-18 10:00AM  Business Wire]
▶ Huron Consulting misses 3Q profit forecasts   [Nov-01-17 06:29PM  Associated Press]
▶ Huron Consulting reports 2Q loss   [Jul-28-17 12:18AM  Associated Press]
▶ District taps familiar partner to study United Medical Center replacement   [May-16-17 12:18PM  American City Business Journals]
▶ Huron Consulting beats Street 1Q forecasts   [May-01-17 07:08AM  Associated Press]
▶ Huron Closes Acquisition of Growth Strategy Firm Innosight   [Mar-01-17 04:15PM  Business Wire]
▶ Huron Consulting misses 4Q profit forecasts   [06:07PM  Associated Press]
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