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Bright Near-Term Outlook for Consulting Services Industry
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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 United States and Europe are the largest markets for consulting services.
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. This has enabled most industry players to pay out stable dividends.
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 customers and shareholders. Further, the industry is one of the earliest pioneers of remote working. The nature of work allows industry players to get the job done through increased use of technology.
With the economy reopening and recovering gradually, both manufacturing and non-manufacturing activities have started gathering steam. Thus, the demand environment for consulting services also got healthier. Notably, economic activity in the manufacturing sector expanded 1.6% from June to July as the PMI measured by Institute for Supply Management (ISM) touched 54.2%. This is the third consecutive month of expansion after April’s contraction that had interrupted an impressive growth rally of 131 consecutive months. Non-manufacturing activities clocked 1% growth from June to July, as the Services PMI measured by ISM touched 58.1%. This is the second consecutive month of expansion after a two-month period of contraction that followed 122 straight months of expansion.
Zacks Industry Rank Indicates Encouraging Prospects
The Consulting Services industry, which is housed within the broader Business Services sector, currently carries a Zacks Industry Rank #83. This rank places it in the top 33% 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.
Before we present a few stocks that you might want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
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 19.1%, the broader sector and the S&P 500 composite gained 3.3% and 18.3%, respectively.
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 26.56X, above the S&P 500’s 22.85X but below the sector’s 30.46X.
Over the past five years, the industry has traded as high as 25.56X, as low as 18.67X and at a median of 21.18X, as the charts below show.
Price to Forward 12 Months P/E Ratio
Bottom Line
The digitization and adoption of technologies has become essential in helping the industry sail through the rough waters. With the economy reopening and recovering gradually, both manufacturing and non-manufacturing activities are now gathering steam and so is the demand for consulting services.
Here are a few stocks from the industry that you might want to consider as these have a favorable Zacks Rank and have been witnessing upward estimate revisions.
CoreLogic, Inc. : This property information, insight, analytics, and data-enabled solutions provider sports a Zacks Rank of 1 (Strong Buy) currently. The Zacks Consensus Estimate for this year’s EPS has been revised 26.6% upward in 60 days’ time. You can see the complete list of today’s Zacks #1 Rank stocks here.
Price and Consensus: CLGX
CBIZ, Inc. (CBZ - Free Report) : This OH-based professional business services provider carries a Zacks Rank of 2 (Buy), at present. The Zacks Consensus Estimate for 2020 EPS has moved 18% north in the last 60 days.
Price and Consensus: CBZ
FTI Consulting (FCN - Free Report) :This WA-based business advisory services company currently holds a Zacks Rank #2. The Zacks Consensus Estimate for the current-year EPS has been revised 2.2% upward in the past 60 days.
Price and Consensus: FCN
NV5 Global, Inc. (NVEE - Free Report) : This FL-based provider of professional and technical engineering and consulting services holds a Zacks Rank of 2 at present. The Zacks Consensus Estimate for the ongoing-year EPS has moved up 8.4% over the past 60 days.
Price and Consensus: NVEE
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.3% per year.
These 7 were selected because of their superior potential for immediate breakout.
Image: Bigstock
Bright Near-Term Outlook for Consulting Services 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 United States and Europe are the largest markets for consulting services.
The space includes prominent names such as Accenture (ACN - Free Report) and Gartner (IT - Free Report) .
Here are the industry’s three major themes.
Zacks Industry Rank Indicates Encouraging Prospects
The Consulting Services industry, which is housed within the broader Business Services sector, currently carries a Zacks Industry Rank #83. This rank places it in the top 33% 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.
Before we present a few stocks that you might want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
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 19.1%, the broader sector and the S&P 500 composite gained 3.3% and 18.3%, respectively.
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 26.56X, above the S&P 500’s 22.85X but below the sector’s 30.46X.
Over the past five years, the industry has traded as high as 25.56X, as low as 18.67X and at a median of 21.18X, as the charts below show.
Price to Forward 12 Months P/E Ratio
Bottom Line
The digitization and adoption of technologies has become essential in helping the industry sail through the rough waters. With the economy reopening and recovering gradually, both manufacturing and non-manufacturing activities are now gathering steam and so is the demand for consulting services.
Here are a few stocks from the industry that you might want to consider as these have a favorable Zacks Rank and have been witnessing upward estimate revisions.
CoreLogic, Inc. : This property information, insight, analytics, and data-enabled solutions provider sports a Zacks Rank of 1 (Strong Buy) currently. The Zacks Consensus Estimate for this year’s EPS has been revised 26.6% upward in 60 days’ time. You can see the complete list of today’s Zacks #1 Rank stocks here.
Price and Consensus: CLGX
CBIZ, Inc. (CBZ - Free Report) : This OH-based professional business services provider carries a Zacks Rank of 2 (Buy), at present. The Zacks Consensus Estimate for 2020 EPS has moved 18% north in the last 60 days.
Price and Consensus: CBZ
FTI Consulting (FCN - Free Report) : This WA-based business advisory services company currently holds a Zacks Rank #2. The Zacks Consensus Estimate for the current-year EPS has been revised 2.2% upward in the past 60 days.
Price and Consensus: FCN
NV5 Global, Inc. (NVEE - Free Report) : This FL-based provider of professional and technical engineering and consulting services holds a Zacks Rank of 2 at present. The Zacks Consensus Estimate for the ongoing-year EPS has moved up 8.4% over the past 60 days.
Price and Consensus: NVEE
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.3% per year.
These 7 were selected because of their superior potential for immediate breakout.
See these time-sensitive tickers now >>