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Heritage Global Inc (HGBL)
NASDAQ:HGBL
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Heritage Global
(NASDAQ:HGBL)
78Outperform
Positive Factors
Financial Position
HGBL had $21.7M in cash, no debt, and is cash flow positive, so there should be no need to raise equity in the near term.
Future Growth Expectations
Management expects at least a 2-year period of sustained annual growth due to existing conditions and macroeconomic tailwinds.
Valuation
HGBL shares currently trade at a significant discount to comparable companies, and the analyst believes this is not justified given HGBL's strong track record of profitability.
Negative Factors
Auction Activity
Heritage's Q4 was a carbon copy of Q3, missing results, driven by tepid auction activity in its Industrial Asset (IA) business.
Financial Performance
HGBL missed consensus on revenue, adjusted EBITDA, and EPS as its business of auctioning industrial assets had an unusually weak quarter.
Market Expectations
Management remains positive on the market opportunity but swung and missed on its expectation for a pickup in Q4, as some of the larger high-profile auctions failed to launch.
Heritage Global (HGBL) vs. S&P 500 (SPY)
Market Cap
$79.86M
Dividend YieldN/A
Average Volume (3M)66.74K
Price to Earnings (P/E)16.1
Beta (1Y)-0.02
Revenue Growth-25.08%
EPS Growth-58.60%
CountryUS
Employees86
SectorFinancial
Sector Strength82
IndustryFinancial - Capital Markets
Share Statistics
EPS (TTM)0.14
Shares Outstanding35,495,056
10 Day Avg. Volume66,861
30 Day Avg. Volume66,737
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)1.78
Price to Cash Flow (P/CF)-3.70
P/FCF Ratio0.00
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$3.83Price Target Upside70.22% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering3
Heritage Global Business Overview & Revenue Model
Company DescriptionHeritage Global, Inc., together with its subsidiaries, operates as an asset services company with focus on financial and industrial asset transactions. The company provides market making, acquisitions, dispositions, valuations, and secured lending services. It focuses on identifying, valuing, acquiring, and monetizing underlying tangible and intangible assets. Heritage Global Inc. acts as an adviser, as well as a principal, acquiring, or brokering manufacturing facilities; surplus industrial machinery and equipment; industrial inventories; accounts receivable portfolios; intellectual property; and business enterprises. The company was formerly known as Counsel RB Capital Inc. and changed its name to Heritage Global, Inc. in August 2013. Heritage Global, Inc. was incorporated in 1983 and is headquartered in San Diego, California.
How the Company Makes MoneyHeritage Global Inc. generates revenue primarily through the facilitation of asset sales and related services. The company's key revenue streams include commissions from auction sales, fees from asset appraisals, and advisory service charges. HGBL leverages its expertise in asset valuation and market trends to optimize sale processes, often partnering with banks, corporations, and other institutions seeking to liquidate surplus or underperforming assets. Additionally, the company may engage in direct purchase and resale of assets, further contributing to its earnings. Significant partnerships with financial institutions and a robust network of industry contacts enhance its ability to secure lucrative transactions and expand its market reach.
Heritage Global Financial Statement Overview
Summary
Heritage Global presents a mixed financial outlook. Strong profitability with a Gross Profit Margin of 87.2% and operational efficiency with EBIT and EBITDA margins above 20% are notable. However, a 25.1% revenue decline and a 40.4% drop in free cash flow raise concerns. The balance sheet is stable with low leverage, although the return on equity decreased significantly, indicating potential challenges in sustaining growth.Income Statement
The income statement shows a robust performance with a Gross Profit Margin of 87.2% and a Net Profit Margin of 11.4% for 2024, indicating strong profitability. However, there is a decline in Total Revenue from 2023 to 2024 by 25.1%, which is a significant concern. EBIT and EBITDA margins remain healthy at 20.0% and 20.9% respectively, showcasing operational efficiency.80
Positive
Balance Sheet
The balance sheet reflects a strong Equity Ratio of 80.2%, demonstrating financial stability. The Debt-to-Equity Ratio is low at 0.04, indicating minimal leverage. Return on Equity has decreased to 7.9% in 2024 from 20.4% in 2023, suggesting reduced profitability on equity.75
Positive
Cash Flow
The cash flow statement illustrates a 40.4% decline in Free Cash Flow from 2023 to 2024, which is a downside. Nevertheless, the Operating Cash Flow to Net Income Ratio is 1.5, highlighting efficient cash generation relative to net income.70
Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 45.36M | 60.55M | 46.91M | 25.79M | 26.18M | Gross Profit |
| 14.21M | 39.81M | 26.00M | 18.36M | 17.07M | EBIT |
| 9.07M | 14.32M | 11.12M | 3.01M | 6.06M | EBITDA |
| 9.47M | 14.83M | 11.66M | 3.47M | 6.42M | Net Income Common Stockholders |
| 5.18M | 12.47M | 15.49M | 3.05M | 9.66M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 21.75M | 12.28M | 12.67M | 13.62M | 23.39M | Total Assets |
| 81.31M | 83.17M | 67.56M | 50.46M | 44.55M | Total Debt |
| 2.71M | 9.88M | 7.15M | 6.58M | 1.00M | Net Debt |
| -19.04M | -2.40M | -5.52M | -7.04M | -22.38M | Total Liabilities |
| 16.11M | 22.09M | 19.26M | 17.82M | 14.61M | Stockholders Equity |
| 65.20M | 61.08M | 48.30M | 32.64M | 29.94M |
| Cash Flow | Free Cash Flow | |||
| 7.61M | 12.76M | 6.27M | -4.06M | 9.14M | Operating Cash Flow |
| 7.75M | 13.02M | 6.48M | -2.63M | 9.15M | Investing Cash Flow |
| 10.87M | -15.87M | -7.52M | -10.20M | 4.51M | Financing Cash Flow |
| -9.15M | 2.46M | 78.00K | 3.06M | 7.00M |
Heritage Global Technical Analysis
Positive
2.25
Price Trends
2.16
Positive
1.95
Positive
1.98
Positive
Market Momentum
0.05
Negative
54.58
Neutral
58.47
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For HGBL, the sentiment is Positive. The current price of 2.25 is above the 20-day moving average (MA) of 2.18, above the 50-day MA of 2.16, and above the 200-day MA of 1.98, indicating a bullish trend. The MACD of 0.05 indicates Negative momentum. The RSI at 54.58 is Neutral, neither overbought nor oversold. The STOCH value of 58.47 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for HGBL.
Heritage Global Risk Analysis
Heritage Global disclosed 28 risk factors in its most recent earnings report. Heritage Global reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Heritage Global Peers Comparison
Overall Rating
UnderperformOutperform
Sector (64)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
78 Outperform | $82.01B | 47.10 | 40.19% | 0.74% | 7.79% | 19.21% | |
78 Outperform | $79.86M | 16.12 | 8.21% | ― | -25.08% | -58.60% | |
68 Neutral | $2.74B | 19.53 | 6.67% | 5.25% | -5.61% | 77.92% | |
64 Neutral | $14.25B | 10.26 | 8.97% | 4.33% | 16.33% | -11.91% | |
62 Neutral | $2.06B | 42.27 | 4.80% | ― | 6.47% | ― | |
44 Neutral | $62.82M | ― | 26.79% | ― | 5.35% | 49.98% |
* Financial Sector Average
Performance Comparison
HGBL
Heritage Global
2.25
-0.40
-15.09%
ASPS
Altisource Portfolio Solutions SA
0.72
-1.17
-61.90%
CTAS
Cintas
203.22
34.39
20.37%
KAR
Kar Auction Services
19.28
2.12
12.35%
MAN
ManpowerGroup
58.66
-13.52
-18.73%
RBA
Ritchie Bros
97.89
22.15
29.24%
Heritage Global Earnings Call Summary
Earnings Call Date: Mar 13, 2025 | % Change Since: 7.66% | Next Earnings Date: May 8, 2025
Earnings Call Sentiment Neutral
The earnings call reflects mixed results for Heritage Global Inc., with some positive developments such as strong cash flow and financial positioning, but also notable challenges including decreased operating income and a net loss in Q4 2024. The company's proactive measures and market opportunities suggest potential for future growth, yet financial setbacks and non-performing loans remain areas of concern.Highlights
Strong Cash Flow and EBITDA
Heritage Global Inc. reported $9 million in cash flow for the year and $2 million in EBITDA through Q4, highlighting ongoing profitability despite challenges.
Expanded Capacity and Market Opportunities
The company has expanded its warehouse size and staffing in anticipation of increased asset flow, indicating proactive measures to capture future opportunities in the auction market.
Strong Financial Position
The company ended the year with no long-term debt and increased stockholders' equity to $65.2 million, highlighting a solid financial position to support future growth.
M&A Prospects and Market Growth
Heritage Global's M&A efforts have produced multiple prospects, and the company is actively engaged, indicating potential for expansion and growth in the coming year.
Lowlights
Decreased Operating Income
The company reported consolidated operating income of $1.5 million in Q4 2024, down from $4.6 million in Q4 2023, showing a significant decline year-over-year.
Net Loss in Q4 2024
Heritage Global reported a net loss of $200,000 in Q4 2024 compared to a net income of $4.9 million in Q4 2023, impacted by a $1.3 million adjustment to the income tax valuation allowance.
Challenges in Industrial and Financial Segments
The industrial assets division saw a decrease in operating income to $800,000 from $1.6 million in Q4 2023, and the financial assets division faced a decline in brokerage operating income to $1.7 million from $2.7 million in the same period.
Non-Performing Loans Impact
Heritage Global Capital's largest borrower defaulted, leading to $22-$23 million in non-accrual status loans, posing a potential risk to future financial performance.
Company Guidance
During the Heritage Global Inc. Fourth Quarter and Full Year 2024 Earnings Call, several key metrics and projections were discussed. The company reported $9 million in cash flow for the year and $2 million in EBITDA for Q4, maintaining profitability across all business units. The industrial assets division generated $800,000 in operating income in Q4, compared to $1.6 million the previous year, while the financial assets division reported $1.9 million in operating income. The company's consolidated operating income was $1.5 million for Q4, down from $4.6 million in 2023, and adjusted EBITDA was $2.1 million, a decrease from $4.9 million in the prior year. The company recorded a net loss of $200,000, or one cent per diluted share, compared to a net income of $4.9 million, or thirteen cents per diluted share, in the same quarter of 2023. The balance sheet showed stockholders' equity of $65.2 million as of December 31, 2024, up from $61.1 million at the end of 2023, with a net working capital of $18.5 million. The company ended the year with no long-term debt and repurchased approximately 1.3 million shares in the open market during fiscal 2024. Looking forward, the company anticipates increased economic pressures in 2025, which could drive demand for auctions, particularly in light of rising defaults and delinquencies in consumer credit markets.Heritage Global Corporate Events
Executive/Board ChangesBusiness Operations and Strategy
Heritage Global Approves New CFO Compensation Plan
Neutral
Jan 3, 2025
Heritage Global, Inc.’s Compensation Committee approved a new compensation plan for its Chief Financial Officer, Brian Cobb, which will be effective from 2025 to 2028. This plan includes an annual base salary of $300,000 and the potential for performance-based cash bonuses, as well as a restricted stock award of 125,000 shares vesting over four years. The announcement highlights the company’s focus on incentivizing risk management and successful mergers and acquisitions, indicating a strategic emphasis on these areas for future growth.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.