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Here's Why You Should Buy CRA International, Sell Core-Mark

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Companies in the Business Services Sector provide consulting, staffing, financial traction, outsourcing, advertising, waste removal, building maintenance, technology services and auction/valuation services.

The sector is trading at a PE of 17x compared to the S&P 500, which is 21.60x. This indicates that the sector is currently undervalued and has tremendous growth potential. 

The sector has seen a steady positive earnings growth trend in 2016 which is expected to continue this year as well. While the sector has a historical EPS growth rate of 9.73%, investors should consider the projected growth rate. Here, the sector expects to grow at a rate of 11.59%, crushing the S&P 500 average which calls for EPS growth of just 7.33%.

For first-quarter 2017, earnings are expected to grow 1.4%, while sales are likely to rise 2.7% from last year. The projected improvement will be majorly driven by the overall improvement in the economy and the job market.

Let’s find out how these two Business Services stocks are faring at present:

Founded in 1965 and headquartered in Boston, MA, CRA International, Inc. (CRAI - Free Report) , formerly known as Charles River Associates, provides legal, regulatory, business consulting and other expert services through its specialized consultants across the globe. The company’s economists, business professionals, engineers and other industry leaders provide original authoritative advice to support various customer activities. 

The company currently has a P/S ratio of about 0.84. This is relatively lower than the industry average of 1.17. In addition, CRA International has a P/B ratio of 1.38, which is also below the industry average of 2.38. This has helped the stock secure a Value score of ‘B’, putting it in the top 40% of all stocks we cover under this. The Valuation metrics show that CRA International is undervalued.

From an earnings growth perspective, the company has a projected growth rate of 8.27%, higher than the industry’s estimated growth of 6.58%. The financial health and growth prospects of CRA International demonstrate its potential to outperform the market. It currently has a Growth Score of ‘A’. Recent price changes and earnings estimate revisions justify the company’s Momentum Score of ‘A’. The company has a VGM score of ‘A’, which makes it a compelling pick for investors. The company is among the top 36% of the Industry.

CRA International currently carries a Zacks Rank #2 (Buy).

Core-Mark Holding Company, Inc. is one of the largest broad-line, full-service wholesale distributors of packaged consumer products to the convenience retail industry in North America. The company provides distribution and logistics services as well as marketing programs to retail locations in states and five Canadian provinces through distribution centres.

The company has a P/S ratio of 0.09, below the industry average of 0.73. Despite having a favorable P/S ratio, the company has a P/B ratio of 2.72 which is slightly above the industry’s 2.47. The stock has a Value score of ‘C’, the Valuation metrics show that Core-Mark may be overvalued at present, making value investors a bit cautious.  

From an earnings growth perspective, the company has a projected growth of 11.11%, higher than the industry growth of 5.0%. Despite having an impressive earnings growth projection, the company’s other metrics fail to impress. It currently has a Growth Score of ‘F’. Recent price changes and earnings estimate revisions indicate a Momentum Score of ‘C’. The company has a VGM score of ‘D’.

Core-Mark currently carries a Zacks Rank #4 (Sell).

Bottom Line

On analysing both the company’s financial metrics, it is clear that investors should steer clear from Core-Mark while CRA International is a compelling pick.

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