FTI CONSULTING, INC (FCN) stock intrinsic value fair value estimate & owner earnings analysis

FTI Consulting sells expert advice through five practices: corporate finance and restructuring, forensic and litigation consulting, economic consulting, technology, and strategic communications. Revenue was $3.79 billion in 2025, up from $1.81 billion in 2016. It owns few hard assets; what it sells is the time of about 8,000 professionals, so the questions are how much cash those people throw off after they are paid, and what it costs to keep them. How we measured earnings. The cash-flow statement makes this company look erratic: operating cash flow was $395 million in 2024 and $152 million in 2025 while net income held near $270 to $280 million. Almost all of that swing is two items. The first is receivables, which move with the timing of client billing. The second is forgivable loans. FTI pays senior professionals large upfront loans that are forgiven over one to ten years if they stay, and it issued $255 million more than it collected in 2025, against $74 million forgiven. We treat these loans as what they are, deferred pay, and charge them as the forgiveness is earned rather than when the cash goes out. We also count bad debts and stock-based pay as real costs. On that basis owner earnings have climbed steadily: about $6.01 a share in 2019, $6.31 in 2022, $7.31 in 2023, $7.81 in 2024 and $8.76 in 2025, or $288 million in 2025. Our previous estimate measured these years on a different basis, which made 2025 look like a collapse, so the earlier figures are not comparable. The surge in loan grants is still important, and it is the main risk in this analysis. Pre-paying retention at roughly three times the rate it is being forgiven means either that a lot of future pay has been locked in early or that keeping people has become more expensive. Either way, future years carry that cost. We treat it as a reason to expect lower margins rather than ignore it. The starting level. We value the business before its lenders and subtract the debt afterward, so we add back interest, which came to about $20 million in 2025. On that basis the business produced $234 to $242 million a year in 2019-2022 and $275 to $308 million in 2023-2025. Measured from 2021 to 2025, a period that includes both a restructuring lull and a busy year, the median is about $275 million. We start below that, at $255 million, because economic consulting, historically one of the firm's most profitable practices, saw revenue fall 16.5% and segment profit fall by more than three quarters in 2025 as antitrust and merger work dried up, and because the forgivable-loan costs already contracted will flow into earnings over the next several years. Owner earnings grew about 3% a share in 2025 and about 7% in business terms. We assume they fall in 2026 and 2027 rather than continue that growth, because the first-half 2026 filing shows net income of $115 million against $134 million a year earlier. What it owes. At June 30, 2026 the company had drawn $1.02 billion on its $900 million revolver plus the incremental facility, against $164 million of cash. That leaves net debt of about $856 million, or roughly $30 a share. It had no debt at the end of 2024. The borrowing paid for share buybacks of roughly $860 million in 2025 alone, at an average of about $163 a share, and buybacks have continued in 2026, cutting the share count to about 27.6 million. The revolver is unsecured, the company is rated investment grade, and the facility matures on November 21, 2027. That date matters in the bear case. Base case, $131.79 a share. Business cash flow dips to about $240 million in 2026-2027 as economic consulting stays weak and loan forgiveness rises, then grows about 3% a year, the pace headcount and billing rates have actually delivered over the last decade, slowing to 2% late in the decade and flat after year ten. Growth is credited only at that demonstrated pace. No recovery in merger activity is assumed, and no margin expansion. Flat earnings after year ten rest on a demonstrated, structural fact: courts, regulators, lenders and boards will keep needing independent experts and restructuring advisers, and FTI has been among the largest suppliers for two decades. The business is worth about $4.57 billion, it owes about $0.86 billion, and the shares are worth about $3.72 billion. Bear case, $61.41 a share. Advisory demand is cyclical in parts that matter. Restructuring work is counter-cyclical, but economic, transaction and communications work fell sharply in the 2009 and 2020 downturns. The bear case combines today's disclosed weakness in economic consulting with one downturn of the 2009 kind and the loss of some senior teams despite the retention loans, which this industry has seen repeatedly. Business cash flow falls from $250 million to about $165 million over two years, recovers only to $185 million, and then declines 2% a year after year ten as the retained teams age out. The revolver must be refinanced in late 2027 in the middle of this; we charge about $65 million for refinancing at higher spreads. Interest of roughly $60 million a year is covered almost three times even at the trough, so the debt can be carried. The business is worth about $2.65 billion, it owes about $0.92 billion including that refinancing cost, and the shares are worth about $1.73 billion. Bull case, $220.91 a share. Economic consulting work returns to the levels of 2023-2024, which it has already reached under current antitrust law, and the large 2025 loan grants do what they were designed to do: keep the best rainmakers producing. Business cash flow reaches $275 million in 2026 and grows 5% a year, the firm's demonstrated rate over 2016-2025, then 1% beyond year ten. The business is worth about $7.09 billion, it owes about $0.86 billion, and the shares are worth about $6.23 billion. Margin of safety price. We are reasonably confident in the earnings level: ten years of filings show cash earnings rising in almost every year, and the apparent 2025 collapse traces entirely to identifiable loans and receivables. We are less confident about the cost of keeping people. The worst plausible outcome no case fully models is a wave of senior departures to private-equity-backed competitors, taking clients and leaving behind unrecoverable loans; with $339 million of employee loans on the books at the end of 2025 and an expiring revolver in 2027, that would hurt. The structure would survive it, though: there are no fixed assets to finance, interest is a modest share of cash flow even in the bear case, and buybacks can simply stop. If we are wrong on the two things we are most likely to be wrong about, the depth of the economic consulting decline and the true ongoing cost of retention, the shares are worth something close to the bear value of about $61. Over the holding period, the business generates roughly $7 to $9 a share of owner earnings a year, which currently goes to buybacks and debt reduction rather than dividends. From $50 a share, the bear value alone implies about a 20% return within a year, and the base case implies several years of returns well above 20%, so $50 is our margin of safety price. Above that, the outcome depends too much on retention spending turning out to be temporary.