Heritage Global (HGBL) AI Stock Analysis

• Market Cap: $70.55M
• Dividend Yield: N/A
• Average Volume (3M): 60.55K
• Price to Earnings (P/E): 14.3
• Beta (1Y): 0.08
• Revenue Growth: -25.08%
• EPS Growth: -58.60%
• Country: US
• Employees: 86
• Sector: Financial
• Sector Strength: 81
• Industry: Financial - Capital Markets
• EPS (TTM): 0.14
• Shares Outstanding: 35,452,280
• 10 Day Avg. Volume: 47,036
• 30 Day Avg. Volume: 60,553
• PEG Ratio: N/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 Ratio: 0.00
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $3.83
• Price Target Upside: 92.46% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 3

Heritage Global's stock score reflects a mix of strengths and challenges. The company shows strong profitability and a solid financial position but faces significant declines in revenue, cash flow, and operating income. Technical indicators suggest bearish momentum, while valuation remains neutral. The company's proactive strategies and market opportunities provide some upside potential amid anticipated economic pressures.

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.

Market Outlook

Management is very bullish due to the backlog of large auctions and the robust pipeline of both auctions and charged-off loans to be brokered.

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.

Earnings 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 Business Overview & Revenue Model

Company Description

Heritage Global Inc. (HGBL) is a leading asset services company specializing in financial and industrial asset transactions. The company operates across various sectors, providing a comprehensive suite of services including asset appraisal, acquisition, disposition, and advisory services. Heritage Global is known for facilitating asset liquidity through auctions, private treaty sales, and direct sales. Its core products and services are designed to maximize value recovery for its clients, which include financial institutions, retailers, and industrial corporations.

How the Company Makes Money

Heritage 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.

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.

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.

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

• Technical Analysis Sentiment: Negative
• Last Price: 1.99
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: Positive

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For HGBL, the sentiment is Negative. The current price of 1.99 is below the 20-day moving average (MA) of 2.09, below the 50-day MA of 2.13, and above the 200-day MA of 1.95, indicating a neutral trend. The MACD of -0.05 indicates Positive momentum. The RSI at 41.35 is Neutral, neither overbought nor oversold. The STOCH value of 14.76 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for HGBL.

Heritage Global Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
SIEB	76 Outperform	$149.20M	11.09	17.28%	―	17.32%	50.52%
HGBL	68 Neutral	$70.55M	14.26	8.21%	―	-25.08%	-58.60%
SRL	63 Neutral	$112.09M	―	-6.15%	3.46%	-14.96%	27.99%
Sector *	63 Neutral	$12.33B	9.59	8.02%	79.26%	12.87%	-4.61%
BTM	50 Neutral	$83.76M	―	77.58%	―	9.20%	26.31%
MDBH	47 Neutral	$42.79M	4.64	21.76%	―	-39.19%	―
COHN	43 Neutral	$16.13M	2.31	-0.31%	12.86%	52.42%	98.43%

Heritage Global Corporate Events

Heritage Global Approves New CFO Compensation Plan

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.