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3 Stocks to Buy From the Flourishing Computer-Services Industry
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Increased adoption and success of the work-from-home trend are enabling the Zacks Computer - Services industry to cater to increasing demand for cloud-enabled software solutions. Also, increasing adoption of digital transformative techniques in healthcare and financial services remains the silver lining for these industry participants. However, the industry is still significantly weak compared with the pre-pandemic level.
CGI Group (GIB - Free Report) , Scientific Games and Perficient (PRFT - Free Report) are well positioned to benefit from the above-mentioned positives. Growing adoption of cyber security solutions, stringent regulatory requirements, digital healthcare and the need for business automation solutions should continue to drive the industry’s growth.
Industry Description
The Zacks Computer - Services industry primarily comprises companies that offer cloud and software-based solutions. Their offerings include national security solutions, business support solutions, and systems engineering as well as software application development solutions. The industry participants cater to varied end markets and customers including intelligence, defense, U.S. government agencies, communications, banking, financial services, insurance, healthcare, as well as media and entertainment. Consultancy companies in the industry are helping clients in their ongoing digital transformation. They are providing end-to-end services, including application development, integration and maintenance; technology infrastructure management; and business process services.
3 Computer-Services Industry Trends to Watch Out For
Remote Work & Online Learning Trends Boost Prospects: The industry’s growth is expected to accelerate in the days ahead on increasing number of remote workers in the wake of coronavirus-induced work-from-home wave. In this era of digital transformation, enterprises are actively seeking a common ground between on-premise and cloud infrastructures that will enable them to provide flexible, as well as easily adoptable hybrid solutions. Coronavirus-induced remote working has led to increased demand for cloud and cost-efficient business support solutions, as well as other digital monetization solutions, which bode well for the industry.
Growing Cyber Attacks is a Tailwind: Increasing number of cyber-attacks and related security risks are expected to keep the industry’s momentum alive. Government agencies are ideal targets for cyber-attacks, as they are entrusted with sensitive information. Therefore, the growing need for cyber security solutions and services in critical areas like defense, intelligence and civilian agencies of the U.S. government bodes well for the industry players.
Regulatory Compliance Drives Demand: The companies in this industry should benefit from increasingly complex network systems, and sensitive information environments in which governments as well as businesses operate. The industry participants are keeping pace with global regulatory and business practice requirements, thereby helping customers incorporate the best practices while complying with governmental and industry norms.
Zacks Industry Rank Indicates Solid Prospects
The Zacks Computer – Services industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #60, which places it in the top 24% 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 bullish near-term 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 industry’s position in the top 50% of the Zacks-ranked industries is a result of positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are optimistic on this group’s earnings growth potential. Since Oct 31, 2020, the industry’s earnings estimates for 2021 have moved up 39%.
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 valuation picture.
Industry Lags Sector and S&P 500
The Zacks Computer – Services industry has underperformed the broader Zacks Computer And Technology sector as well as the S&P 500 Index over the past year.
The industry has returned 31.1% over this period compared with the S&P 500’s increase of 39.6% and the broader sector’s rally of 48%.
One-Year Price Performance
Industry's Current Valuation
On the basis of forward 12-month P/E, which is a commonly used multiple for valuing computer stocks, we see that the industry is currently trading at 17.22X compared with the S&P 500’s 21.66X. However, it is below the sector’s forward-12-month P/E of 27.78X.
Over the last five years, the industry has traded as high as 23.83X, as low as 15.31X and at the median of 18.05X, as the chart below shows.
Forward 12-Month Price-to-Earnings (P/E) Ratio
3 Computer-Services Stocks to Buy Right Now
CGI Group: This consulting company is riding on an expanding clientele. Strong demand for the company’s end-to-end services across communications and media, banking, insurance, government, health & life sciences, manufacturing, retail & consumer, transportation and logistics, energy and utilities space is expected to drive top-line growth.
This Zacks Rank #2 (Buy) is also benefiting from strong demand for new digital and modernization projects across retail and consumer services, financial services and government end-markets. CGI’s strong partner base is also a key catalyst. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for its fiscal 2021 earnings has moved up 0.9% to $4.44 per share over the past 30 days. The stock has risen 14.6% year to date.
Price and Consensus: GIB
Scientific Games: This Las Vegas-based company is a leading provider of instant tickets in domestic and overseas markets. Product innovation, better instant ticket product management, prize payout increases and sales of higher priced tickets are major growth drivers. This Zacks Rank #2 company is riding on robust performances by Lottery, SciPlay and Digital businesses.
The Zacks Consensus Estimates for its fiscal 2021 earnings has been steady at 44 cents per share over the past 30 days. The stock has risen 88.3% year to date.
Price and Consensus: SGMS
Perficient: This Zacks Rank #2 company is riding on an expanding customer base. Strong demand for Perficient’s global delivery model (40% of delivery resources are currently offshore) has been a key catalyst. Markedly, in first-quarter 2021, the company booked 92 deals greater than $500K compared with 71 deals in the year-ago quarter and 70 in the previous quarter.
The consensus mark for fiscal 2021 earnings has jumped 48% to $3.12 per share over the past 30 days. The stock has risen 72.4% year to date.
Price and Consensus: PRFT
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Image: Bigstock
3 Stocks to Buy From the Flourishing Computer-Services Industry
Increased adoption and success of the work-from-home trend are enabling the Zacks Computer - Services industry to cater to increasing demand for cloud-enabled software solutions. Also, increasing adoption of digital transformative techniques in healthcare and financial services remains the silver lining for these industry participants. However, the industry is still significantly weak compared with the pre-pandemic level.
CGI Group (GIB - Free Report) , Scientific Games and Perficient (PRFT - Free Report) are well positioned to benefit from the above-mentioned positives. Growing adoption of cyber security solutions, stringent regulatory requirements, digital healthcare and the need for business automation solutions should continue to drive the industry’s growth.
Industry Description
The Zacks Computer - Services industry primarily comprises companies that offer cloud and software-based solutions. Their offerings include national security solutions, business support solutions, and systems engineering as well as software application development solutions. The industry participants cater to varied end markets and customers including intelligence, defense, U.S. government agencies, communications, banking, financial services, insurance, healthcare, as well as media and entertainment. Consultancy companies in the industry are helping clients in their ongoing digital transformation. They are providing end-to-end services, including application development, integration and maintenance; technology infrastructure management; and business process services.
3 Computer-Services Industry Trends to Watch Out For
Remote Work & Online Learning Trends Boost Prospects: The industry’s growth is expected to accelerate in the days ahead on increasing number of remote workers in the wake of coronavirus-induced work-from-home wave. In this era of digital transformation, enterprises are actively seeking a common ground between on-premise and cloud infrastructures that will enable them to provide flexible, as well as easily adoptable hybrid solutions. Coronavirus-induced remote working has led to increased demand for cloud and cost-efficient business support solutions, as well as other digital monetization solutions, which bode well for the industry.
Growing Cyber Attacks is a Tailwind: Increasing number of cyber-attacks and related security risks are expected to keep the industry’s momentum alive. Government agencies are ideal targets for cyber-attacks, as they are entrusted with sensitive information. Therefore, the growing need for cyber security solutions and services in critical areas like defense, intelligence and civilian agencies of the U.S. government bodes well for the industry players.
Regulatory Compliance Drives Demand: The companies in this industry should benefit from increasingly complex network systems, and sensitive information environments in which governments as well as businesses operate. The industry participants are keeping pace with global regulatory and business practice requirements, thereby helping customers incorporate the best practices while complying with governmental and industry norms.
Zacks Industry Rank Indicates Solid Prospects
The Zacks Computer – Services industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #60, which places it in the top 24% 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 bullish near-term 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 industry’s position in the top 50% of the Zacks-ranked industries is a result of positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are optimistic on this group’s earnings growth potential. Since Oct 31, 2020, the industry’s earnings estimates for 2021 have moved up 39%.
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 valuation picture.
Industry Lags Sector and S&P 500
The Zacks Computer – Services industry has underperformed the broader Zacks Computer And Technology sector as well as the S&P 500 Index over the past year.
The industry has returned 31.1% over this period compared with the S&P 500’s increase of 39.6% and the broader sector’s rally of 48%.
One-Year Price Performance
Industry's Current Valuation
On the basis of forward 12-month P/E, which is a commonly used multiple for valuing computer stocks, we see that the industry is currently trading at 17.22X compared with the S&P 500’s 21.66X. However, it is below the sector’s forward-12-month P/E of 27.78X.
Over the last five years, the industry has traded as high as 23.83X, as low as 15.31X and at the median of 18.05X, as the chart below shows.
Forward 12-Month Price-to-Earnings (P/E) Ratio
3 Computer-Services Stocks to Buy Right Now
CGI Group: This consulting company is riding on an expanding clientele. Strong demand for the company’s end-to-end services across communications and media, banking, insurance, government, health & life sciences, manufacturing, retail & consumer, transportation and logistics, energy and utilities space is expected to drive top-line growth.
This Zacks Rank #2 (Buy) is also benefiting from strong demand for new digital and modernization projects across retail and consumer services, financial services and government end-markets. CGI’s strong partner base is also a key catalyst. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for its fiscal 2021 earnings has moved up 0.9% to $4.44 per share over the past 30 days. The stock has risen 14.6% year to date.
Price and Consensus: GIB
Scientific Games: This Las Vegas-based company is a leading provider of instant tickets in domestic and overseas markets. Product innovation, better instant ticket product management, prize payout increases and sales of higher priced tickets are major growth drivers. This Zacks Rank #2 company is riding on robust performances by Lottery, SciPlay and Digital businesses.
The Zacks Consensus Estimates for its fiscal 2021 earnings has been steady at 44 cents per share over the past 30 days. The stock has risen 88.3% year to date.
Price and Consensus: SGMS
Perficient: This Zacks Rank #2 company is riding on an expanding customer base. Strong demand for Perficient’s global delivery model (40% of delivery resources are currently offshore) has been a key catalyst. Markedly, in first-quarter 2021, the company booked 92 deals greater than $500K compared with 71 deals in the year-ago quarter and 70 in the previous quarter.
The consensus mark for fiscal 2021 earnings has jumped 48% to $3.12 per share over the past 30 days. The stock has risen 72.4% year to date.
Price and Consensus: PRFT
Infrastructure Stock Boom to Sweep America
A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made.
The only question is “Will you get into the right stocks early when their growth potential is greatest?”
Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.
Download FREE: How to Profit from Trillions on Spending for Infrastructure >>