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FCN or NCI: Which Consulting Services Stock is Better Placed?
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The consulting services industry is currently riding on improving economy, reduced tax rates, robust manufacturing and non-manufacturing activity. At the same time, it is bearing the brunt of higher talent costs due to a competitive talent market coupled with Trump’s stringent policies on immigration.
We believe that the macro drivers should offset operating challenges encountered by the industry in the long run. In fact, looking at shareholder returns over the past year, it appears that the border economic recovery is enhancing investors’ confidence in the industry.
While the stocks in this industry have collectively gained 24.5%, the Zacks S&P 500 Composite and Zacks Business Services Sector have rallied 12% and 19.1%, respectively.
One-Year Price Performance
Given this backdrop, let’s do a comparative analysis of two consulting services stocks - FTI Consulting, Inc. (FCN - Free Report) and Navigant Consulting, Inc. (NCI - Free Report) . FTI Consulting has a market capitalization of $2.25 billion and Navigant’s market cap is $1 billion.
As both the stocks carry a Zacks Rank #3 (Hold), we are using certain other parameters to give investors a better insight.
Price Performance
FTI Consulting has performed impressively on the bourse year to date compared with Navigant and the industry. While FTI Consulting stock gained a massive 75.9%, Navigant and the industry rallied a respective 12.5% and 30.5% over the said time frame.
Earnings Guidance
Earnings growth along with stock price gains is often an indication of a company’s strong prospects. FTI Consulting’s second-quarter earnings are projected to grow 57.5% year over year while that of Navigant are expected to increase 33.3%.
Looking at the full year 2018 picture, FTI Consulting’s earnings are projected to grow 14.2% while that of Navigant are expected to increase 19.3%. Thus, FTI Consulting has an edge over Navigantin terms of quarterly earnings growth. However, in case of yearly earnings growth, Navigant looks better poised.
Earnings Estimate Revisions
Earnings estimate revisions for both the companies remained unchanged for the second quarter and year in the last 60 days. It seems that analysts are waiting for the earnings releases after which they may revise estimates.
Net Margin
Net profit margin helps investors evaluate a company’s business model in terms of pricing policy, cost structure and operating efficiency, and shows how good it is at converting revenues into profits. Hence, a strong net profit margin is preferred by all classes of investors.
Even though readings for both the companies compare unfavorably with the industry’s figure of 10.2%, FTI Consulting has a lead with TTM net margin of 6.2%, compared with Navigant’s 5.1%.
Valuation
Comparing the companies with each other and the industry on the basis of price to forward 12 months’ earnings, we see that the industry’s 23.3X is ahead of FTI Consulting’s 22.1X and Navigant’s 16.4X.
In terms of price to forward 12 months earnings growth, we see that the industry’s 2.1X is again ahead of FTI Consulting’s 1.8X and Navigant’s 1.2X.
So any way you cut it, the industry is overvalued than both the companies and FTI Consulting is overvalued than Navigant.
Bottom Line
Our comparative analysis shows that FTI Consulting scores over Navigant in terms of net margin and expected earnings growth for the second quarter. Its share price performance over the past year has also been relatively better. However, this share price rally in the past year has led to a relatively rich valuation for FTI Consulting compared to Navigant.
The long-term expected earnings per share (three to five years) growth rate for BG Staffing and FLEETCOR Technologies is 20% and 16.5%, respectively.
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Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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FCN or NCI: Which Consulting Services Stock is Better Placed?
The consulting services industry is currently riding on improving economy, reduced tax rates, robust manufacturing and non-manufacturing activity. At the same time, it is bearing the brunt of higher talent costs due to a competitive talent market coupled with Trump’s stringent policies on immigration.
We believe that the macro drivers should offset operating challenges encountered by the industry in the long run. In fact, looking at shareholder returns over the past year, it appears that the border economic recovery is enhancing investors’ confidence in the industry.
The Zacks Consulting Services Industry , which is a stock group within the broader Zacks Business Services Sector, has outpaced the S&P 500 and its own sector in the past year.
While the stocks in this industry have collectively gained 24.5%, the Zacks S&P 500 Composite and Zacks Business Services Sector have rallied 12% and 19.1%, respectively.
One-Year Price Performance
Given this backdrop, let’s do a comparative analysis of two consulting services stocks - FTI Consulting, Inc. (FCN - Free Report) and Navigant Consulting, Inc. (NCI - Free Report) . FTI Consulting has a market capitalization of $2.25 billion and Navigant’s market cap is $1 billion.
As both the stocks carry a Zacks Rank #3 (Hold), we are using certain other parameters to give investors a better insight.
Price Performance
FTI Consulting has performed impressively on the bourse year to date compared with Navigant and the industry. While FTI Consulting stock gained a massive 75.9%, Navigant and the industry rallied a respective 12.5% and 30.5% over the said time frame.
Earnings Guidance
Earnings growth along with stock price gains is often an indication of a company’s strong prospects. FTI Consulting’s second-quarter earnings are projected to grow 57.5% year over year while that of Navigant are expected to increase 33.3%.
Looking at the full year 2018 picture, FTI Consulting’s earnings are projected to grow 14.2% while that of Navigant are expected to increase 19.3%. Thus, FTI Consulting has an edge over Navigantin terms of quarterly earnings growth. However, in case of yearly earnings growth, Navigant looks better poised.
Earnings Estimate Revisions
Earnings estimate revisions for both the companies remained unchanged for the second quarter and year in the last 60 days. It seems that analysts are waiting for the earnings releases after which they may revise estimates.
Net Margin
Net profit margin helps investors evaluate a company’s business model in terms of pricing policy, cost structure and operating efficiency, and shows how good it is at converting revenues into profits. Hence, a strong net profit margin is preferred by all classes of investors.
Even though readings for both the companies compare unfavorably with the industry’s figure of 10.2%, FTI Consulting has a lead with TTM net margin of 6.2%, compared with Navigant’s 5.1%.
Valuation
Comparing the companies with each other and the industry on the basis of price to forward 12 months’ earnings, we see that the industry’s 23.3X is ahead of FTI Consulting’s 22.1X and Navigant’s 16.4X.
In terms of price to forward 12 months earnings growth, we see that the industry’s 2.1X is again ahead of FTI Consulting’s 1.8X and Navigant’s 1.2X.
So any way you cut it, the industry is overvalued than both the companies and FTI Consulting is overvalued than Navigant.
Bottom Line
Our comparative analysis shows that FTI Consulting scores over Navigant in terms of net margin and expected earnings growth for the second quarter. Its share price performance over the past year has also been relatively better. However, this share price rally in the past year has led to a relatively rich valuation for FTI Consulting compared to Navigant.
Stocks to Consider
Some better-ranked stocks in the broader Business Services sector include BG Staffing, Inc. (BGSF - Free Report) and FLEETCOR Technologies, Inc. , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The long-term expected earnings per share (three to five years) growth rate for BG Staffing and FLEETCOR Technologies is 20% and 16.5%, respectively.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>