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3 Top Stocks From the Flourishing Consulting Services Industry
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Encouraging manufacturing and service activities, along with the increased adoption and success of the work-from-home trend, are enabling the Zacks Consulting Services industry to support the demand environment that is getting healthier with the gradual economic recovery.
Service demand, innovation and technology investments are helping Gartner, Inc. (IT - Free Report) , CRA International, Inc. (CRAI - Free Report) and FTI Consulting, Inc. (FCN - Free Report) sail through these testing times.
About the Industry
Companies grouped under the Consulting Services category offer professional advice in management, IT, human resources, environmental regulations, logistics and marketing, real estate, serving multiple end markets. The space includes prominent names such as Accenture (ACN) and Gartner (IT - Free Report) .
What’s Shaping the Future of Consulting Services Industry?
Exponential Growth: This multi-billion-dollar industry has witnessed exponential growth since the 2008 financial crisis, enjoying a steady rate of revenue, profit, and cash-flow growth. Consequently, the trend has enabled most industry players to pay out stable dividends.
Pandemic Resiliency: Consulting services is one of the least pandemic-affected industries. This is because, amid such a volatile situation, organizations have increased their search for advice that can help protect their employees, and stay closer to consumers and shareholders. Further, this industry is one of the earliest pioneers of remote working that has now become an integral part of the new normal. The nature of work enables industry players to function efficiently through the increased use of technology.
Non-stop Service Demand: With the economy recovering gradually, both manufacturing and non-manufacturing activities are now healthy and so is the demand environment for consulting services. Notably, Manufacturing PMI measured by Institute for Supply Management (ISM) touched 60.7% in April, coming in below 64.7% in March. Despite the fall, a reading above 50 denoted an expansion in activity, in fact, marking the 11th consecutive month of expansion after April’s contraction in 2020, primarily due to the pandemic. The Services PMI measured by ISM touched 62.7% in April, a tad below 63.7% in March. But again, a reading above 50 indicated expansion in non-manufacturing activity. April is the 11th consecutive month of expansion after a two-month period of contraction that followed 122 straight months of expansion.
Zacks Industry Rank Indicates Bright Prospects
The Consulting Services industry, which is housed within the broader Business Services sector, currently carries a Zacks Industry Rank #58. This rank places it in the top 23% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates solid near-term growth prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The sell-side analysts covering the companies in this industry have been steadily pushing their estimates north. Over the past year, the industry’s consensus earnings estimate for 2021 has moved 20.9% north.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and current valuation.
Industry Outperforms the S&P 500 and the Sector
Over the past year, the Consulting Services industry has outperformed the S&P 500 composite and the broader sector.
While the industry has rallied 58%, the S&P 500 composite and the broader sector gained a respective 47.8% and 9.9%.
One-Year Price Performance
Industry’s Current Valuation
On the basis of the forward 12-month price-to-earnings (P/E), which is a commonly-used multiple for valuing consulting services companies, we see that the industry is currently trading at 28.47X, above the S&P 500’s 21.81X but below the sector’s 29.33X.
Over the past five years, the industry has traded as high as 29.12X, as low as 18.68X and at a median of 22.22X, as the charts below show.
Gartner: The research and advisory giant sports a Zacks Rank of 1, at present.
Operating in an industry with low barriers to entry, the company has an integrated research and consulting team designed to best serve client needs. This enables it to have a competitive advantage over its rivals. Over time, Gartner’s research reports have become indispensable tools for diverse companies across different sectors, fortifying its leading position in the market.
The Zacks Consensus Estimate for the current-year EPS has been revised 40.5% upward in the past 60 days. The stock has surged 102.9% in the past year.
Price and Consensus: IT
CRA International: This global provider of economic, financial, and management consulting services currently carries a Zacks Rank #2.
Charles River has a diversified business with service offerings across areas of functional expertise, client base and geographical regions. Being proficient in multiple industries helps the company meet various client needs and offer other innovative services. Multi-disciplinary set up enables it to bring experts from all fields on a single platform. Diversification in business helps reduce the company’s dependence on any specific market, industry or geographic area. It also increases the company’s ability to adapt to changing conditions.
The Zacks Consensus Estimate for the ongoing-year EPS has moved up 18.7% in 60 days’ time. The stock has gained a massive 125.1% over the past year.
Price and Consensus: CRAI
FTI Consulting: This business advisory services provider also carries a Zacks Rank of 2, at present.
The company’s potential to club diverse issues like damage assessment, accounting, economics, statistics, finance and industry under a single roof looks impressive. FTI Consulting continues to pursue opportunities in areas such as business transformation services, transaction advisory business, restructuring, retail, construction, data and analytics, cyber business, information governance and international arbitration. This makes it an excellent partner for global clients dealing with international arbitration issues, thereby generating continued revenue growth from the existing international operations.
The Zacks Consensus Estimate for the 2021 EPS has moved 3.7% north in the past 60 days. The stock has appreciated 19.6% over the past year.
Price and Consensus: FCN
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3 Top Stocks From the Flourishing Consulting Services Industry
Encouraging manufacturing and service activities, along with the increased adoption and success of the work-from-home trend, are enabling the Zacks Consulting Services industry to support the demand environment that is getting healthier with the gradual economic recovery.
Service demand, innovation and technology investments are helping Gartner, Inc. (IT - Free Report) , CRA International, Inc. (CRAI - Free Report) and FTI Consulting, Inc. (FCN - Free Report) sail through these testing times.
About the Industry
Companies grouped under the Consulting Services category offer professional advice in management, IT, human resources, environmental regulations, logistics and marketing, real estate, serving multiple end markets. The space includes prominent names such as Accenture (ACN) and Gartner (IT - Free Report) .
What’s Shaping the Future of Consulting Services Industry?
Exponential Growth: This multi-billion-dollar industry has witnessed exponential growth since the 2008 financial crisis, enjoying a steady rate of revenue, profit, and cash-flow growth. Consequently, the trend has enabled most industry players to pay out stable dividends.
Pandemic Resiliency: Consulting services is one of the least pandemic-affected industries. This is because, amid such a volatile situation, organizations have increased their search for advice that can help protect their employees, and stay closer to consumers and shareholders. Further, this industry is one of the earliest pioneers of remote working that has now become an integral part of the new normal. The nature of work enables industry players to function efficiently through the increased use of technology.
Non-stop Service Demand: With the economy recovering gradually, both manufacturing and non-manufacturing activities are now healthy and so is the demand environment for consulting services. Notably, Manufacturing PMI measured by Institute for Supply Management (ISM) touched 60.7% in April, coming in below 64.7% in March. Despite the fall, a reading above 50 denoted an expansion in activity, in fact, marking the 11th consecutive month of expansion after April’s contraction in 2020, primarily due to the pandemic. The Services PMI measured by ISM touched 62.7% in April, a tad below 63.7% in March. But again, a reading above 50 indicated expansion in non-manufacturing activity. April is the 11th consecutive month of expansion after a two-month period of contraction that followed 122 straight months of expansion.
Zacks Industry Rank Indicates Bright Prospects
The Consulting Services industry, which is housed within the broader Business Services sector, currently carries a Zacks Industry Rank #58. This rank places it in the top 23% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates solid near-term growth prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The sell-side analysts covering the companies in this industry have been steadily pushing their estimates north. Over the past year, the industry’s consensus earnings estimate for 2021 has moved 20.9% north.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and current valuation.
Industry Outperforms the S&P 500 and the Sector
Over the past year, the Consulting Services industry has outperformed the S&P 500 composite and the broader sector.
While the industry has rallied 58%, the S&P 500 composite and the broader sector gained a respective 47.8% and 9.9%.
One-Year Price Performance
Industry’s Current Valuation
On the basis of the forward 12-month price-to-earnings (P/E), which is a commonly-used multiple for valuing consulting services companies, we see that the industry is currently trading at 28.47X, above the S&P 500’s 21.81X but below the sector’s 29.33X.
Over the past five years, the industry has traded as high as 29.12X, as low as 18.68X and at a median of 22.22X, as the charts below show.
We present three stocks that currently carry a Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy) and are well positioned for near-term growth. You can see the complete list of today’s Zacks #1 Rank stocks here.
Price to Forward 12 Months P/E Ratio
3 Consulting Services Stocks to Bet On
Gartner: The research and advisory giant sports a Zacks Rank of 1, at present.
Operating in an industry with low barriers to entry, the company has an integrated research and consulting team designed to best serve client needs. This enables it to have a competitive advantage over its rivals. Over time, Gartner’s research reports have become indispensable tools for diverse companies across different sectors, fortifying its leading position in the market.
The Zacks Consensus Estimate for the current-year EPS has been revised 40.5% upward in the past 60 days. The stock has surged 102.9% in the past year.
Price and Consensus: IT
CRA International: This global provider of economic, financial, and management consulting services currently carries a Zacks Rank #2.
Charles River has a diversified business with service offerings across areas of functional expertise, client base and geographical regions. Being proficient in multiple industries helps the company meet various client needs and offer other innovative services. Multi-disciplinary set up enables it to bring experts from all fields on a single platform. Diversification in business helps reduce the company’s dependence on any specific market, industry or geographic area. It also increases the company’s ability to adapt to changing conditions.
The Zacks Consensus Estimate for the ongoing-year EPS has moved up 18.7% in 60 days’ time. The stock has gained a massive 125.1% over the past year.
Price and Consensus: CRAI
FTI Consulting: This business advisory services provider also carries a Zacks Rank of 2, at present.
The company’s potential to club diverse issues like damage assessment, accounting, economics, statistics, finance and industry under a single roof looks impressive. FTI Consulting continues to pursue opportunities in areas such as business transformation services, transaction advisory business, restructuring, retail, construction, data and analytics, cyber business, information governance and international arbitration. This makes it an excellent partner for global clients dealing with international arbitration issues, thereby generating continued revenue growth from the existing international operations.
The Zacks Consensus Estimate for the 2021 EPS has moved 3.7% north in the past 60 days. The stock has appreciated 19.6% over the past year.
Price and Consensus: FCN
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In 2021, this world-changing technology is projected to generate $327.5 billion in revenue. Now Shark Tank star and billionaire investor Mark Cuban says AI will create "the world's first trillionaires." Zacks' urgent special report reveals 3 AI picks investors need to know about today.
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