Rise in manufacturing and service activities, along with the increased adoption and success of the work-from-home trend, is enabling the Zacks
Consulting Services industry to support the demand environment that is getting healthier with the gradual economic recovery.
Service demand, technology investments and cost-management programs are helping CoreLogic, Inc. , Information Services Group, Inc. (
III Quick Quote III - Free Report) and NV5 Global, Inc. ( NVEE Quick Quote NVEE - Free Report) to 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).
What’s Shaping the Future of Consulting Services Industry? 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. Exponential Growth: 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, the 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 increased use of technology. Sustained Service Demand: With the economy reopening and recovering gradually, both manufacturing and non-manufacturing activities are now gathering steam. Thus, the demand environment for consulting services is also getting healthier. Notably, economic activity in the manufacturing sector expanded 3.2% from November to December last year, as the PMI measured by Institute for Supply Management (ISM) touched 60.7%. This is the eighth consecutive month of expansion after April’s contraction that had interrupted an impressive growth rally of 131 consecutive months. Non-manufacturing activities clocked 1.3% growth from November to December, as the Services PMI measured by ISM touched 57.2%. This is the seventh consecutive month of expansion after a two-month period of contraction that followed 122 straight months of expansion. Manufacturing and Service in the Pink: 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 #45. This rank places it in the top 18% of more than 250 Zacks industries.
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 23.7%, the broader sector has declined 4.7%, while the S&P 500 composite gained 18.3%.
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 28.02X, above the S&P 500’s 23.38X but below the sector’s 30.93X.
Over the past five years, the industry has traded as high as 28.02X, as low as 18.68X and at a median of 21.77X, as the charts below show.
Price to Forward 12 Months P/E Ratio 3 Consulting Services Stocks to Bet On
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. CoreLogic, Inc.: This property information, insight, analytics, and data-enabled solutions provider currently sports a Zacks Rank #1.
The company is investing in products and solutions, operational capabilities, technology platforms and infrastructure to build strong strategic client partnerships. Its top line is benefiting from strength in core mortgage and insurance as well as spatial solutions. The bottom line is being aided by revenue growth, operating leverage, apt business mix and cost-efficiency programs.
The Zacks Consensus Estimate for the 2021 EPS has moved 9.8% north in the past 60 days. The stock has appreciated 63.8% over the past year.
Price and Consensus: CLGX Information Services Group, Inc.: This global technology research and advisory firm also flaunts a Zacks Rank of 1, currently.
The company is benefiting from strength across its insurance, public sector, retail and telecom verticals that witnessed double-digit year-over-year growth in the last reported quarter. Its services like take-out and captive monetization, supplier governance and pricing benchmarks, cloud automation data analytics, workforce solutions and networking remain in demand from clients. Demand for its digital services is anticipated to increase this year.
The Zacks Consensus Estimate for the current-year EPS has been revised 25% upward in the past 60 days. The stock has appreciated 37.5% in the past year.
Price and Consensus: III NV5 Global, Inc.: This professional and technical engineering and consulting services company holds a Zacks Rank of 2 at present.
Most of the company’s services are considered essential, and are being delivered successfully through the remote working model amid the pandemic. NV5’s infrastructure, utility services and international markets have registered growth. The company continues to gain from its proactive cross-selling program that has fetched $7.7 million in cross-sells in the last reported quarter.
The Zacks Consensus Estimate for the ongoing-year EPS has moved up 11.2% in 60 days’ time.
Price and Consensus: NVEE