CRA International Stock Is Estimated To Be Significantly Overvalued

GuruFocus.com
·4 min read

- By GF Value

The stock of CRA International (NAS:CRAI, 30-year Financials) is believed to be significantly overvalued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $76.44 per share and the market cap of $584.4 million, CRA International stock is believed to be significantly overvalued. GF Value for CRA International is shown in the chart below.


CRA International Stock Is Estimated To Be Significantly Overvalued
CRA International Stock Is Estimated To Be Significantly Overvalued

Because CRA International is significantly overvalued, the long-term return of its stock is likely to be much lower than its future business growth, which averaged 13.7% over the past three years and is estimated to grow 8.73% annually over the next three to five years.

Link: These companies may deliever higher future returns at reduced risk.

It is always important to check the financial strength of a company before buying its stock. Investing in companies with poor financial strength have a higher risk of permanent loss. Looking at the cash-to-debt ratio and interest coverage is a great way to understand the financial strength of a company. CRA International has a cash-to-debt ratio of 0.30, which is worse than 71% of the companies in Business Services industry. The overall financial strength of CRA International is 6 out of 10, which indicates that the financial strength of CRA International is fair. This is the debt and cash of CRA International over the past years:

CRA International Stock Is Estimated To Be Significantly Overvalued
CRA International Stock Is Estimated To Be Significantly Overvalued

Companies that have been consistently profitable over the long term offer less risk for investors who may want to purchase shares. Higher profit margins usually dictate a better investment compared to a company with lower profit margins. CRA International has been profitable 9 over the past 10 years. Over the past twelve months, the company had a revenue of $508.4 million and earnings of $3.08 a share. Its operating margin is 6.84%, which ranks in the middle range of the companies in Business Services industry. Overall, the profitability of CRA International is ranked 7 out of 10, which indicates fair profitability. This is the revenue and net income of CRA International over the past years:

CRA International Stock Is Estimated To Be Significantly Overvalued
CRA International Stock Is Estimated To Be Significantly Overvalued

Growth is probably one of the most important factors in the valuation of a company. GuruFocus' research has found that growth is closely correlated with the long-term performance of a company's stock. If a company's business is growing, the company usually creates value for its shareholders, especially if the growth is profitable. Likewise, if a company's revenue and earnings are declining, the value of the company will decrease. CRA International's 3-year average revenue growth rate is better than 80% of the companies in Business Services industry. CRA International's 3-year average EBITDA growth rate is 37.4%, which ranks better than 90% of the companies in Business Services industry.

One can also evaluate a company's profitability by comparing its return on invested capital (ROIC) to its weighted average cost of capital (WACC). Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the return on invested capital exceeds the weighted average cost of capital, the company is likely creating value for its shareholders. During the past 12 months, CRA International's ROIC is 5.00 while its WACC came in at 9.66. The historical ROIC vs WACC comparison of CRA International is shown below:

CRA International Stock Is Estimated To Be Significantly Overvalued
CRA International Stock Is Estimated To Be Significantly Overvalued

To conclude, the stock of CRA International (NAS:CRAI, 30-year Financials) is believed to be significantly overvalued. The company's financial condition is fair and its profitability is fair. Its growth ranks better than 90% of the companies in Business Services industry. To learn more about CRA International stock, you can check out its 30-year Financials here.

To find out the high quality companies that may deliever above average returns, please check out GuruFocus High Quality Low Capex Screener.

This article first appeared on GuruFocus.

Recommended Stories

  • NC man, Texas girlfriend posed inside the Capitol on Jan. 6. Next stop: A courtroom

    A QAnon devotee and a lifestyle coach posted photos and live videos during Jan. 6 riot, FBI document shows.

  • Trump rape accuser adds to former president's legal woes by asking court to keep defamation lawsuit alive

    The former Elle columnist E. Jean Carroll published an account accusing Trump of raping her in a Bergdorf Goodman dressing room in the mid-1990s.

  • A 21-year-old man who drank 4 energy drinks a day was hospitalized with heart and kidney failure

    The British man was hospitalized for two months with serious side effects from drinking nearly half a gallon of caffeinated energy drinks daily.

  • His coworkers were stealing his marijuana, police say. He’s now been charged with murder

    Roland Day was convinced that three of his coworkers had rifled through his bag and stolen his marijuana.

  • Last Castro of Cuba finally steps down as island gripped by most serious bout of protests in years

    For the first time in more than 60 years, a Castro will not be ruling Cuba, with Raúl, brother of Fidel, stepping down as head of the country’s all-powerful Communist Party. The repressed island nation of 11 million people is at a precarious tipping point, with the economy in tatters and the clamour for personal freedoms growing as more Cubans gain access to the internet. There have been protests, hunger strikes and even clashes with police as an underground opposition movement has increasingly ventured into the open. Late on Friday night, the Castro era was broken as 89-year-old Raúl announced his resignation as the first secretary of the Communist Party of Cuba - a position more powerful than that of the President. He has handed over to Miguel Díaz-Canel, a bicycle-riding, jean-wearing Beatles fan who has previously championed LGBT rights and advocated for a freer society.

  • Justice Department sues Roger Stone over $2M in unpaid taxes

    The Justice Department sued Donald Trump's ally Roger Stone on Friday, accusing the conservative provocateur and his wife of failing to pay nearly $2 million in income tax. It alleges the couple underpaid their income tax by more than $1.5 million from 2007 until 2011 and separately alleges Stone also owes more than $400,000 for not fully paying his tax bill in 2018. The suit alleges that the couple used a commercial entity known as Drake Ventures to “shield their personal income from enforced collection” and to fund a “lavish lifestyle.”

  • Judge denies Ghislaine Maxwell's motions to toss sex charges

    A judge on Friday rejected Ghislaine Maxwell’s arguments to toss charges that she recruited three teenager girls from 1994 to 1997 for then-boyfriend Jeffrey Epstein to sexually abuse. U.S. District Judge Alison Nathan in Manhattan denied claims that a non-prosecution agreement Epstein reached with federal prosecutors over a dozen years ago protects Maxwell from prosecution. The judge, however, did agree that Maxwell can be prosecuted separately on perjury charges.

  • Jerry Falwell Jr.'s infamous photo with his pants unzipped was taken during a yacht party honoring a raunchy TV show, lawsuit says

    When the photo was taken, Jerry Falwell Jr. was the president of an evangelical Christian university that bans sexual content and alcoholic drinks.

  • ‘This is a racial issue.’ Boy punished for hairstyle at Texas school, mom says

    The boy’s hair was styled into a braid.

  • Republican lawmakers condemned pro-Trump caucus emphasizing 'Anglo-Saxon political traditions,' said GOP is not about 'nativism'

    Rep. Adam Kinzinger said anyone who joins should be stripped of committee assignments, while Reps. Kevin McCarthy and Liz Cheney condemned nativism.

  • Commentary: Inside the maddening 28-hour odyssey to buy tickets for Disneyland's reopening

    How mounting hours, crashing web pages and disappointing updates derailed our TV critic's long-delayed journey to the happiest #*&$%!! place on Earth.

  • Mike Tindall pays tribute to Prince Philip with photograph of Duke with great-granddaughter Mia

    Mike Tindall has paid tribute to his grandfather-in-law, the Duke of Edinburgh, calling him a "devoted family man who we will forever miss but always love." The former England centre who married the Queen and Prince Philip's granddaughter, Zara Phillips paid a personal tribute on Instagram, sharing a photo of his eldest daughter Mia enjoying a picnic at a log cabin with the Duke. "It’s been a very sad week but it has given us time to reflect on great memories and stories both personal and shared," Mr Tindall said. "A devoted family man who we will forever miss but always love." The photograph, understood to have been shot in the Highlands, was taken by the Duchess of Cambridge.

  • Derek Chauvin trial: 3 questions America needs to ask about seeking racial justice in a court of law

    A demonstration outside the Hennepin County Government Center in Minneapolis on March 29, 2021, the day Derek Chauvin's trial began on charges he murdered George Floyd. Stephen Maturen/Getty ImagesThere is a difference between enforcing the law and being the law. The world is now witnessing another in a long history of struggles for racial justice in which this distinction may be ignored. Derek Chauvin, a 45-year-old white former Minneapolis police officer, is on trial for second-degree murder, third-degree murder, and second-degree manslaughter for the May 25, 2020, death of George Floyd, a 46-year-old African American man. There are three questions I find important to consider as the trial unfolds. These questions address the legal, moral and political legitimacy of any verdict in the trial. I offer them from my perspective as an Afro-Jewish philosopher and political thinker who studies oppression, justice and freedom. They also speak to the divergence between how a trial is conducted, what rules govern it – and the larger issue of racial justice raised by George Floyd’s death after Derek Chauvin pressed his knee on Floyd’s neck for more than nine minutes. They are questions that need to be asked: 1. Can Chauvin be judged as guilty beyond a reasonable doubt? The presumption of innocence in criminal trials is a feature of the U.S. criminal justice system. And a prosecutor must prove the defendant’s guilt beyond a reasonable doubt to a jury of the defendant’s peers. The history of the United States reveals, however, that these two conditions apply primarily to white citizens. Black defendants tend to be treated as guilty until proved innocent. Racism often leads to presumptions of reasonableness and good intentions when defendants and witnesses are white, and irrationality and ill intent when defendants, witnesses and even victims are black. An activist watches the murder trial of former Minneapolis police officer Derek Chauvin outside the Hennepin County Government Center in Minneapolis on March 30, 2021. Kerem Yucel / AFP/via Getty Images Additionally, race affects jury selection. The history of all-white juries for black defendants and rarely having black jurors for white ones is evidence of a presumption of white people’s validity of judgment versus that of Black Americans. Doubt can be afforded to a white defendant in circumstances where it would be denied a black one. Thus, Chauvin, as white, could be granted that exculpating doubt despite the evidence shared before millions of viewers in a live-streamed trial. 2. What is the difference between force and violence? The customary questioning of police officers who harm people focuses on their use of what’s called “excessive force.” This presumes the legal legitimacy of using force in the first place in the specific situation. Violence, however, is the use of illegitimate force. As a result of racism, Black people are often portrayed as preemptively guilty and dangerous. It follows that the perceived threat of danger makes “force” the appropriate description when a police officer claims to be preventing violence. This understanding makes it difficult to find police officers guilty of violence. To call the act “violence” is to acknowledge that it is improper and thus falls, in the case of physical acts of violence, under the purview of criminal law. Once their use of force is presumed legitimate, the question of degree makes it nearly impossible for jurors to find officers guilty. Floyd, who was suspected of purchasing items from a store with a counterfeit bill, was handcuffed and complained of not being able to breathe when Chauvin pulled him from the police vehicle and he fell face down on the ground. Footage from the incident revealed that Chauvin pressed his knee on Floyd’s neck for nine minutes and 29 seconds. Floyd was motionless several minutes in, and he had no pulse when Alexander Kueng, one of the officers, checked. Chauvin didn’t remove his knee until paramedics arrived and asked him to get off of Floyd so they could examine the motionless patient. If force under the circumstances is unwarranted, then its use would constitute violence in both legal and moral senses. Where force is legitimate (for example, to prevent violence) but things go wrong, the presumption is that a mistake, instead of intentional wrongdoing, occurred. An important, related distinction is between justification and excuse. Violence, if the action is illegitimate, is not justified. Force, however, when justified, can become excessive. The question at that point is whether a reasonable person could understand the excess. That understanding makes the action morally excusable. Minneapolis Police Chief Medaria Arradondo testified, Court TV via AP, Pool 3. Is there ever excusable police violence? Police are allowed to use force to prevent violence. But at what point does the force become violence? When its use is illegitimate. In U.S. law, the force is illegitimate when done “in the course of committing an offense.” Sgt. David Pleoger, Chauvin’s former supervisor, stated in the trial: “When Mr. Floyd was no longer offering up any resistance to the officers, they could have ended their restraint.” Minneapolis Police Chief Medaria Arradondo testified, “To continue to apply that level of force to a person proned-out, handcuffed behind their back, that in no way, shape or form is anything that is by policy.” He declared, “I vehemently disagree that that was an appropriate use of force.” That an act was deemed by prosecutors to be violent, defined as an illegitimate use of force resulting in death, is a necessary conclusion for charges of murder and manslaughter. Both require ill intent or, in legal terms, a mens rea (“evil mind”). The absence of a reasonable excuse affects the legal interpretation of the act. That the act was not preventing violence but was, instead, one of committing it, made the action inexcusable. The Chauvin case, like so many others, leads to the question: What is the difference between enforcing the law and imagining being the law? Enforcing the law means one is acting within the law. That makes the action legitimate. Being the law forces others, even law-abiding people, below the enforcer, subject to their actions. If no one is equal to or above the enforcer, then the enforcer is raised above the law. Such people would be accountable only to themselves. Police officers and any state officials who believe they are the law, versus implementers or enforcers of the law, place themselves above the law. Legal justice requires pulling such officials back under the jurisdiction of law. The purpose of a trial is, in principle, to subject the accused to the law instead of placing him, her, or them above it. Where the accused is placed above the law, there is an unjust system of justice. This article has been updated to correct the charges Chauvin is facing. [Deep knowledge, daily. Sign up for The Conversation’s newsletter.]This article is republished from The Conversation, a nonprofit news site dedicated to sharing ideas from academic experts. It was written by: Lewis R. Gordon, University of Connecticut. Read more:Derek Chauvin trial begins in George Floyd murder case: 5 essential reads on police violence against Black menPolice officers accused of brutal violence often have a history of complaints by citizensWhite supremacy is the root of all race-related violence in the US Lewis R. Gordon does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

  • ‘Godzilla Shark’ with 12 rows of teeth now has an official name — inspired by dragons

    The creature lived 300 million years ago.

  • ‘Godzilla Shark’ with 12 rows of teeth now has an official name — inspired by dragons

    The creature lived 300 million years ago.

  • Sean Hannity blasted for calling Adam Toledo a ‘13-year-old man’

    A guest on Hannity’s Fox News show had previously referred to Kyle Rittenhouse, who was 17 at the time, as a ‘little boy’

  • One killed, one injured, another missed in three police shootings in Miami-Dade, Broward

    In an unusually violent day for law enforcement in South Florida, police in Miami-Dade and Broward counties fired their weapons at three people Thursday, killing one, injuring another and missing a third.

  • Russia beefs up warship presence in Black Sea as Ukraine tensions simmer

    Two Russian warships transited the Bosphorus en route to the Black Sea on Saturday and 15 smaller vessels completed a transfer to the sea as Moscow beefs up its naval presence at a time of tense relations with the West and Ukraine. The reinforcement coincides with a huge build-up of Russian troops near Ukraine, something Moscow calls a temporary defensive exercise, and follows an escalation in fighting in eastern Ukraine between Russian-backed separatists and Ukrainian government forces.

  • Scientists created a hybrid human-monkey embryo in a lab, sparking concerns others could take the experiment too far

    The embryos were made by injecting human stem cells into macaque embryos as part of research into early human development.

  • Prosecutor didn’t ‘fully inform himself’ before testifying Adam Toledo had gun

    A Cook County prosecutor who said in court the boy was armed when Chicago cops shot him is now backtracking. A prosecutor who said in court that 13-year-old Adam Toledo had a gun when he was shot by Chicago Police is now backtracking on his statement. Toledo was shot and killed in the early morning hours of March 29 while police were detaining a man, Ruben Roman, responding to a call of shots fired around 2:30 a.m.