Resources Connection (NAS:RGP) Intrinsic Value: DCF (FCF Based)

: $37.58 (As of Today)

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As of today (2023-09-28), Resources Connection's intrinsic value calculated from the Discounted Cash Flow model is $37.58.

Note: Discounted Cash Flow model is only suitable for predictable companies (Business Predictability Rank higher than 1-Star). If the company's predictability rank is 1-Star or Not Rated, result may not be accurate due to the low predictability of business and the data will not be stored into our database.

Resources Connection's Predictability Rank is 1-Star. Thus, this page is only used for demonstration purposes and the DCF related results in the screener and portfolio will appear as zero.

Margin of Safety (FCF Based) using Discounted Cash Flow model for Resources Connection is 59.90%.

The industry rank for Resources Connection's Intrinsic Value: DCF (FCF Based) or its related term are showing as below:

RGP's Price-to-DCF (FCF Based) is not ranked ^*
in the Business Services industry.
Industry Median: 0.82
* Ranked among companies with meaningful Price-to-DCF (FCF Based) only.

Resources Connection Intrinsic Value: DCF (FCF Based) Historical Data

The historical data trend for Resources Connection's Intrinsic Value: DCF (FCF Based) can be seen below:

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.

* Premium members only.

Resources Connection Annual Data

Trend

May14

May15

May16

May17

May18

May19

May20

May21

May22

May23

Intrinsic Value: DCF (FCF Based)

48.41

Resources Connection Quarterly Data
	Aug18	Nov18	Feb19	May19	Aug19	Nov19	Feb20	May20	Aug20	Nov20	Feb21	May21	Aug21	Nov21	Feb22	May22	Aug22	Nov22	Feb23	May23
Intrinsic Value: DCF (FCF Based)																-	-	-	-	-

Resources Connection Intrinsic Value: DCF (FCF Based) Calculation

This is the intrinsic value calculated from the Discounted Cash Flow model with default parameters. In a discounted cash flow model, the future cash flow is estimated based on a cash flow growth rate and a discount rate. The cash flow of the future is discounted to its current value at the discount rate. All of the discounted future cash flow is added together to get the current intrinsic value of the company.

Usually a two-stage model is used when calculating a stock's intrinsic value using a discounted cash flow model. The first stage is called the growth stage; the second is called the terminal stage. In the growth stage the company grows at a faster rate. Because it cannot grow at that rate forever, a lower rate is used for the terminal stage.

GuruFocus DCF calculator is a two-stage model. The default values are defined as:

1. Discount Rate: d = 11%
A reasonable discount rate assumption should be at least the long term average return of the stock market, which can be estimated from risk free rate plus risk premium of stock market. We used the 10-Year Treasury Constant Maturity Rate as the risk free rate and rounded up to the nearest integer, then added a risk premium of 6% to get the estimated discount rate. Some investors use their expected rate of return, which is also reasonable. A typical discount rate can be anywhere between 6% - 20%.

2. Growth Rate in the growth stage: g1 = 10.10%
The Growth Rate in the growth stage is initially set as the default 10-Year FCF Growth Rate (Per Share). In cases where the 10-year growth rate is unavailable, it defaults to using the 5-Year FCF Growth Rate (Per Share). If both the 10-year and 5-year growth rates are unavailable, the system defaults to the 3-Year FCF Growth Rate (Per Share).
However, it's important to note that there is a growth rate range. If the calculated growth rate exceeds 20%, it will be capped at 20%. Conversely, if the calculated growth rate falls below 5%, it will be adjusted to 5% to maintain a reasonable range.
=> Resources Connection's average Free Cash Flow Growth Rate in the past 10 years was 10.10%, which is between 5% and 20%. => GuruFocus defaults => Growth Rate: 10.10%

3. Years of Growth Stage: y1 = 10

4. Terminal Growth Rate: g2 = 4%

5. Years of Terminal Growth: y2 = 10

6. Free Cash Flow per Share: fcf = $2.331.
However, GuruFocus DCF calculator is actually a Discounted Earnings calculator, the EPS without NRI is used as the default. The reason we are doing this is we found that historically stock prices are more correlated with earnings than free cash flow.

All of the default settings can be changed and the results are calculated automatically.

Resources Connection's Intrinsic Value: DCF (FCF Based) for today is calculated as

Intrinsic Value: DCF (FCF Based)	=	Free Cash Flow per Share	*	{[(1+g1)/(1+d)	+	(1+g1)^2/(1+d)^2	+	...	+	(1+g1)^10/(1+d)^10]
	+	(1+g1)^10/(1+d)^10	*	[(1+g2)/(1+d)	+	(1+g2)^2/(1+d)^2	+	...	+	(1+g2)^10/(1+d)^10]}

set x = (1+g1)/(1+d) = (1+0.101)/(1+0.11) = 0.99189189189189
and y = (1+g2)/(1+d) = (1+0.04)/(1+0.11) = 0.93693693693694

Intrinsic Value: DCF (FCF Based)

Free Cash Flow per Share

{[x

x^2

...

x^10]

x^10

y^2

...

y^10]}

Free Cash Flow per Share

(1-x^10)

(1-x)

x^10

(1-y^10)

(1-y)]

2.331

16.1205

37.58

Margin of Safety (FCF Based)	=	(Intrinsic Value: DCF (FCF Based)	-	Current Price)	/	Intrinsic Value: DCF (FCF Based)
	=	(37.58	-	15.07)	/	37.58
	=	59.90 %

Resources Connection (NAS:RGP) Intrinsic Value: DCF (FCF Based) Explanation

Unlike valuation methods such as Net Current Asset Value, Tangible Book per Share, Graham Number, Median PS Value etc, discounted Cash Flow model evaluates the companies based on their future earnings power instead of their assets.

Be Aware

What you need to know about the DCF model:

1. The DCF model evaluates a company based on its future earnings power
2. Growth is taken into account; therefore a faster growth company is worth more if everything else is the same.
3. Since we are projecting future growth, it is assumed that the company will grow at the same rate as it did during the past 10 years. Therefore this model works better for the companies that have relatively consistent performance.
4. The DCF model works poorly for inconsistent performers such as cyclicals.
5. What discount rate should you use? Your expected return from the investment is a good discount rate assumption.
6. A larger margin of safety should be required for companies with less predictable businesses.

You can screen for stocks that trade below their Intrinsic Value: DCF (FCF Based) and Intrinsic Value: DCF (Earnings Based) with the GuruFocus All-in-One Screener. Companies with a high Predictability Rank that trade at a discount to their Intrinsic Value: DCF (FCF Based) and Intrinsic Value: DCF (Earnings Based) can be found in the screen of Undervalued Predictable Companies.

Resources Connection Intrinsic Value: DCF (FCF Based) Related Terms

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Resources Connection (NAS:RGP) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Industrials » Business Services » Resources Connection Inc (NAS:RGP) » Definitions » Intrinsic Value: DCF (FCF Based)

Comparable Companies

Traded in Other Exchanges

RCO:Germany

Address

17101 Armstrong Avenue, Suite 100, Irvine, CA, USA, 92614

Website

https://www.rgp.com

Resources Connection Inc provides consulting and business initiative support services primarily through its operative subsidiary, Resources Global Professionals. It has two segments RGP ( Resources Global Professionals.) and Other segments. The company offers transformation and improvement, financial reporting and analysis, strategy development, and program and project management services and support. Its clients operate in the accounting, finance, corporate governance, risk and compliance management, corporate advisory, strategic communications and restructuring, information management, human capital, supply chain management, and legal and regulatory sectors.

Executives

Susan Collyns	director	6053 W CENTURY BLVD STE 1100, C/O CALIFORNIA PIZZA KITCHEN INC, LOS ANGLES CA 90045-6430
David P White	director	17101 ARMSTRONG AVE., STE 100, IRVINE CA 92614
Lisa Pierozzi	director	17101 ARMSTRONG AVE, STE 100, IRVINE CA 92614
Timothy L Brackney	officer: President and COO	17101 ARMSTRONG AVE, STE 100, IRVINE CA 92614
Jennifer Y Ryu	officer: Interim CFO	17101 ARMSTRONG AVE, STE 100, IRVINE CA 92614
Kate W Duchene	officer: President & CEO	17101 ARMSTRONG AVE, STE 100, IRVINE CA 92614
Michael H Wargotz	director	AXCESS WORLDWIDE, 515 MADISON AVE., 15TH FLOOR, NEW YORK NY 10022
Anne Shih	director	17101 ARMSTRONG AVENUE, IRVINE CA 92614
Maltzan Marco Von	director	17101 ARMSTRONG AVE, STE 100, IRVINE CA 92614
Herbert M Mueller	officer: CFO & EVP
Susan J Crawford	director	17101 ARMSTRONG AVE, IRVINE CA 92614
Tracy B Stephens	officer: EVP & COO	360 WESTMINSTER, HOUSTON TX 77024
Nathan W Franke	officer: EVP and Chief Financial Office	17101 ARMSTRONG AVE, IRVINE CA 92614
Robert F Kistinger	director	17101 ARMSTRONG AVE, STE 100, IRVINE CA 92614
Thomas Christopoul	director	RESOURCES CONNECTION INC, 17101 ARMSTRONG AVENUE, IRVINE CA 92614