FORRESTER RESEARCH, INC. (FORR) stock intrinsic value fair value estimate & owner earnings analysis

Forrester Research sells research subscriptions (tracked as contract value, about $283 million at June 30, 2026), consulting and events to technology buyers and vendors. About 77% of revenue is booked in the United States. The company is shrinking. Revenue fell from $538 million in 2022 to $397 million in 2025, and first-half 2026 revenue was another 7.9% lower. It has restructured every year since 2022, including an 8% workforce cut in February 2026 and an exit from strategy consulting. It took goodwill write-downs of $110.7 million in 2025 and $10.8 million in the first quarter of 2026. The encouraging facts are recent: contract value was down only 3% year over year at June 30, 2026 (it fell 6% in 2025), wallet retention recovered to 89% from 87%, and client retention held at 77%. What changed since our last look. Our earlier estimate (bear about $9, base about $20, bull about $28) was too high, for two reasons that pull in opposite directions. First, a correction: our earlier owner-earnings figures treated the cash Forrester pays for office rent as a timing item and took it out of costs, which overstated every year since 2019 by roughly $0.56 to $0.76 per share. With rent counted properly, owner earnings per share were $1.87 in 2022, $0.58 in 2023, $0.49 in 2024 and just $0.17 in 2025. Second, the earlier valuation ignored the balance sheet. It never gave credit for Forrester's cash and investments or deducted its $35 million bank loan. We now value the business first, before lenders, and then adjust for what it owes and what it holds. Adding the net cash raises the value by about $3.16 per share. How we measured earnings. We start from operating cash flow and add back non-cash charges such as the goodwill write-downs, the $7.3 million write-off of the note received for the FeedbackNow sale, and amortization of acquired intangibles. We then subtract stock compensation (about $12 million a year), maintenance capital spending and office rent, and we strip out swings in working capital. Because we credit the company's cash separately, we remove the roughly $2.8 million a year of after-tax interest income from earnings and add back the loan interest. On that basis the business produced about $0.62 per share in 2023, $0.46 in 2024 and $0.14 in 2025. We use the median of 2023-2025, about $0.46, as the reference level. The years 2019-2022 describe a bigger, growing company with $450-540 million of revenue, which no longer exists. We do not start from that level, though. Owner earnings fell 65% in 2025 (70% before interest), and the first two quarters of 2026 show operating income, excluding the write-down, of about -$4.4 million against +$3.3 million a year earlier. Our base case therefore starts 2026 at about break-even, a further decline, with no assumed rebound in year one. The $28 million renovation of the Cambridge headquarters in the first half of 2026 is a one-time project, and we treat the unpaid remainder as a commitment rather than a recurring cost. Contracted help we did credit. The Cambridge lease amendment of April 2025 hands back three floors at mid-2026. Scheduled lease payments fall from $11.0 million in 2025 to $7.6 million in 2026, roughly $7.4 million a year in 2027-2028 and $6.6 million a year in 2029-2030. That saving of $0.18-0.23 per share a year is signed, and we count it in every case. We credit no revenue growth in any case. A shrinking subscription business also releases less prepaid customer cash each year: net customer prepayments are about 17% of revenue. So each case charges the cash drain that its own revenue decline would cause. Bear case, about $0.64 per share. Wallet retention slips back to 2025's 87%, revenue keeps falling about 7% a year to 2030 and 5% a year to 2035, and cost cuts lag as they did in 2023-2025. The business loses about $0.20-0.30 per share a year through 2030 and $0.10 a year through 2035, and on this path nothing of value is left after that. On those terms the business itself is worth about -$49 million (-$2.52 per share), including about $23 million of cash drained as customer prepayments shrink. Against that it holds about $61 million more cash than it owes, leaving about $12 million for shareholders. Here the bank facility matters: its leverage and interest-coverage covenants would likely be breached, and the $35 million would have to be repaid from cash before its March 2029 maturity. The company can do that, but it uses up the cushion. Base case, about $5.24 per share. Revenue falls 7.5% in 2026, then the decline tapers (4%, 2%, 1%) to flat by 2030 at about $342 million, consistent with contract value now falling only 3%. The February 2026 cost cuts and the lease savings lift owner earnings from about break-even in 2026 to about $0.25 per share (about $4.8 million) by 2030. That is still well below the 2023-2024 level. We hold it through 2040 and fade it to zero by 2050, because nothing we can point to today supports these earnings beyond that. The business is worth about $40 million ($2.07 per share). Add about $61 million of net cash ($3.16 per share) for about $101 million, or $5.24 per share. Bull case, about $10.80 per share. Better retention holds, contract value stabilizes, and revenue is roughly flat from 2027 at about $367 million. Owner earnings return to about $0.60 per share, near the 2023 level, with help from the lease savings. They hold through 2050 and then fade, reflecting a research franchise that has renewed with clients for four decades. The business is worth about $147 million ($7.64 per share), plus the same $61 million of net cash, for about $208 million. What the company owes and holds. At June 30, 2026 Forrester had $130.8 million of cash and marketable investments and a $35 million revolving loan, floating at about 5.2% and due March 2029. We set aside $25 million as working cash, which also covers the loan's minimum-liquidity test, and about $9.8 million for the unpaid part of the headquarters renovation. That leaves net cash of about $61 million, or $3.16 per share on 19.3 million diluted shares. The loan costs slightly less than our 6% benchmark over its short remaining life, a difference too small to matter. Office leases are not treated as debt because rent is already charged in earnings. Items we could not fully reconcile. At the end of 2025, $87.8 million of the cash sat outside the United States, and bringing it home could cost some tax. We made no deduction for this. The landlord's $17.2 million renovation allowance appears to have been received in the first half of 2026, based on the large drop in prepaid and other assets. If it has not been received, value is about $0.89 per share higher than shown. What would make this estimate wrong. On the upside, contract value turning to growth as the AI Access product lifts renewals. On the downside, wallet retention sliding back to 87% or lower while costs lag, which would consume the cash that supports most of today's value. The shares are worth little more than net cash unless the business stops shrinking. The margin-of-safety price is about $3.00, roughly the net cash per share. At that price the balance sheet carries most of the value if the bear case unfolds, and the base case implies a return at or above the target.