Are Investors Undervaluing ExlService Holdings, Inc. (NASDAQ:EXLS) By 22%?

Simply Wall St.11-24 21:31

Key Insights The projected fair value for ExlService Holdings is US$59.51 based on 2 Stage Free Cash Flow to Equity ExlService Holdings' US$46.21 share price signals that it might be 22% ...

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(NASDAQ:EXLS) By 22%?","media":"Simply Wall St.","content":"<div>\n<p>Key Insights\n\n The projected fair value for ExlService Holdings is US$59.51 based on 2 Stage Free Cash Flow to Equity \n ExlService Holdings' US$46.21 share price signals that it might be 22% ...</p>\n\n<a href=\"https://finance.yahoo.com/news/investors-undervaluing-exlservice-holdings-inc-133148731.html\">Source Link</a>\n\n</div>\n","source":"yahoofinance","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Are Investors Undervaluing ExlService Holdings, Inc. (NASDAQ:EXLS) By 22%?</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nAre Investors Undervaluing ExlService Holdings, Inc. (NASDAQ:EXLS) By 22%?\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-24 21:31 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://finance.yahoo.com/news/investors-undervaluing-exlservice-holdings-inc-133148731.html><strong>Simply Wall St.</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Key Insights\n\n The projected fair value for ExlService Holdings is US$59.51 based on 2 Stage Free Cash Flow to Equity \n ExlService Holdings' US$46.21 share price signals that it might be 22% ...</p>\n\n<a href=\"https://finance.yahoo.com/news/investors-undervaluing-exlservice-holdings-inc-133148731.html\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4112","symbol_name":"金融交易所和数据","start_time":0,"source_url":"https://finance.yahoo.com/news/investors-undervaluing-exlservice-holdings-inc-133148731.html","article_id":"2485013799","we_media_id":null,"thumbnails":["https://s.yimg.com/uu/api/res/1.2/lYjdNEDnNRYUa1jxj0SSew--~B/aD00MzI7dz0xMTk0O2FwcGlkPXl0YWNoeW9u/https://media.zenfs.com/en/simply_wall_st__316/436d8a2bc259eaa09523a3bc325b5211"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2485013799","pubTimestamp":1732455108,"sourceInfo":{"source_id":"yahoofinance","name":"雅虎金融"},"weMediaInfo":null,"summary":"The projected fair value for ExlService Holdings is US$59.51 based on 2 Stage Free Cash Flow to Equity. ExlService Holdings' US$46.21 share price signals that it might be 22% undervalued. The US$46.44 analyst price target for EXLS is 22% less than our estimate of fair value. Today we will run through one way of estimating the intrinsic value of ExlService Holdings, Inc.  by taking the forecast future cash flows of the company and discounting them back to today's value. We will take advantage of the Discounted Cash Flow  model for this purpose. There's really not all that much to it, even though it might appear quite complex.Companies can be valued in a lot of ways, so we would point out that a DCF is not perfect for every situation. 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(NASDAQ:EXLS) by taking the forecast future cash flows of the company and discounting them back to today's value. We will take advantage of the Discounted Cash Flow (DCF) model for this purpose. There's really not all that much to it, even though it might appear quite complex. \n Companies can be valued in a lot of ways, so we would point out that a DCF is not perfect for every situation. Anyone interested in learning a bit more about intrinsic value should have a read of the Simply Wall St analysis model. \n Check out our latest analysis for ExlService Holdings \n Crunching The Numbers \n We're using the 2-stage growth model, which simply means we take in account two stages of company's growth. In the initial period the company may have a higher growth rate and the second stage is usually assumed to have a stable growth rate. To start off with, we need to estimate the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years. \n Generally we assume that a dollar today is more valuable than a dollar in the future, so we discount the value of these future cash flows to their estimated value in today's dollars: \n 10-year free cash flow (FCF) estimate \n\n\n\n\n2025\n2026\n2027\n2028\n2029\n2030\n2031\n2032\n2033\n2034\n\n\n Levered FCF ($, Millions) \nUS$289.0m\nUS$322.0m\nUS$346.9m\nUS$368.5m\nUS$387.4m\nUS$404.4m\nUS$419.9m\nUS$434.5m\nUS$448.6m\nUS$462.2m\n\n\nGrowth Rate Estimate Source\nAnalyst x1\nAnalyst x1\nEst @ 7.75%\nEst @ 6.21%\nEst @ 5.13%\nEst @ 4.38%\nEst @ 3.85%\nEst @ 3.48%\nEst @ 3.22%\nEst @ 3.04%\n\n\n Present Value ($, Millions) Discounted @ 6.4% \nUS$272\nUS$285\nUS$288\nUS$288\nUS$285\nUS$279\nUS$273\nUS$265\nUS$257\nUS$249\n\n\n\n(\"Est\" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = US$2.7b\n After calculating the present value of future cash flows in the initial 10-year period, we need to calculate the Terminal Value, which accounts for all future cash flows beyond the first stage. The Gordon Growth formula is used to calculate Terminal Value at a future annual growth rate equal to the 5-year average of the 10-year government bond yield of 2.6%. We discount the terminal cash flows to today's value at a cost of equity of 6.4%. \nTerminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = US$462m× (1 + 2.6%) ÷ (6.4%– 2.6%) = US$13b\nPresent Value of Terminal Value (PVTV)= TV / (1 + r)10= US$13b÷ ( 1 + 6.4%)10= US$6.8b\n The total value is the sum of cash flows for the next ten years plus the discounted terminal value, which results in the Total Equity Value, which in this case is US$9.6b. In the final step we divide the equity value by the number of shares outstanding. Relative to the current share price of US$46.2, the company appears a touch undervalued at a 22% discount to where the stock price trades currently. The assumptions in any calculation have a big impact on the valuation, so it is better to view this as a rough estimate, not precise down to the last cent. \n\n\n\n  NasdaqGS:EXLS Discounted Cash Flow November 24th 2024\n \n\n Important Assumptions \n We would point out that the most important inputs to a discounted cash flow are the discount rate and of course the actual cash flows. If you don't agree with these result, have a go at the calculation yourself and play with the assumptions. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at ExlService Holdings as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 6.4%, which is based on a levered beta of 0.909. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. \nSWOT Analysis for ExlService Holdings\n\n\nStrength\n\nDebt is not viewed as a risk.\n\n\nBalance sheet summary for EXLS.\n\n\n\nWeakness\n\nEarnings growth over the past year underperformed the Professional Services industry.\n\n\n\nOpportunity\n\nAnnual revenue is forecast to grow faster than the American market.\n\n\nTrading below our estimate of fair value by more than 20%.\n\n\n\nThreat\n\n Annual earnings are forecast to grow slower than the American market.\n\n\nWhat else are analysts forecasting for EXLS?\n\n\n\n Looking Ahead: \n Although the valuation of a company is important, it is only one of many factors that you need to assess for a company. DCF models are not the be-all and end-all of investment valuation. Rather it should be seen as a guide to \"what assumptions need to be true for this stock to be under/overvalued?\" For example, changes in the company's cost of equity or the risk free rate can significantly impact the valuation. Can we work out why the company is trading at a discount to intrinsic value? For ExlService Holdings, there are three relevant elements you should consider: \n\n Risks: As an example, we've found 1 warning sign for ExlService Holdings that you need to consider before investing here. \n Management:Have insiders been ramping up their shares to take advantage of the market's sentiment for EXLS's future outlook? Check out our management and board analysis with insights on CEO compensation and governance factors. \n Other High Quality Alternatives: Do you like a good all-rounder? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing! \n\n PS. Simply Wall St updates its DCF calculation for every American stock every day, so if you want to find the intrinsic value of any other stock just search here.\nHave feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. 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