HIL
Hill International, Inc.
$3.40
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Moderate
·
Conviction
Undervalued
Trading 38.4% below fair value
You pay
$3.40
Bear
$4.05
Fair
$5.52
Bull
$6.99
Bear
$4.05
+19.1%
$0.37 × 14x + net cash
Fair
$5.52
+62.4%
$0.37 × 18x + net cash
Bull
$6.99
+105.6%
$0.37 × 22x + net cash
Key Value Driver
Through-cycle normalized EPS ($0.37)
Implied Market Multiple
9.2x
Summary
Using 7-year normalized EPS of $0.37 at a 18x cycle multiple, the base-case value is $5.52 per share. P/TBV cross-check: 7.2x.
Warnings
This company has a built-in lending arm whose debt is mixed in with the main business. We capped the debt adjustment to avoid overstating what the core business owes.
Price-to-book value of 7.2x is above the normal range for this type of business (0.7x-2.0x). The stock may already price in a strong cycle.
Key Risks
- Standard 10-year DCF produces unreliable terminal values for cyclicals
- 'Cheap' P/E at cycle peak is the most common value trap — normalize first
- Captive finance subsidiaries have different risk profiles from manufacturing