Exponent Inc. (EXPO)

Business Description

Exponent Inc is a United States-based company that provides engineering and scientific consulting services on a project-by-project basis. The company’s consultant team is composed of scientists, physicians, engineers, as well as business and regulatory consultants. The company currently operates through two segments. The engineering and other scientific segments, which accounts for the majority of revenue, provides servicing encompassing biomechanics, biomedical engineering, buildings and structures, civil engineering, construction consulting, etc. The environmental and health segment covers chemical regulation and food safety, ecological and biological sciences, environmental and earth sciences and others. The company generates almost all its revenue from America.

Recommendation (Nov 2020)

An outstanding business, but highly overvalued at $82.50 per share.

$82.50 implies that revenue and NOPAT will grow at 14% CAGR for the next 10 years. This is close to impossible for this business.

If we assume that EPS will grow between 12-18% CAGR for 5 years and that EXPO will trade at a PE multiple of 30x in 2025, then the implied Investor Return would be between 0-5%. Highly unimpressive.

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