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Anatomy of Success: FTI Consulting (FCN)

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The Zacks Rank methodology is a unique way to discover some of the best companies to invest in, and is a useful tool for beginner and more experienced investors alike; it identifies companies both big and small that have the right characteristics to produce superior gains.

When a company earns that coveted Zacks Rank #1 (Strong Buy) label, its means they have a high probability of outperforming the market over the next one to three months. But, achieving this high rank is not an easy thing to do, as only 5% of companies within the Zacks Rank universe earn this position.

Below, we highlight a top performing stock in the business services industry, and by following our ranking system, investors could have realized nice gains.

FTI Consulting, Inc. (FCN - Free Report)

Headquartered in Washington, D.C., FTI Consulting is an independent global business advisory firm that helps other organizations manage change, mitigate risk, and resolve disputes, handling everything from financial, legal, and operational issues to political, regulatory, reputational, and transactional situations.

The first time FCN was added to the #1 (Strong Buy) list was after it reported solid fiscal 2017 fourth quarter results at the end of February. Both earnings and revenues beat the Zacks Consensus Estimate; revenues of $467.7 million were actually a record, driven higher thanks to demand within its Corporate Finance & Restructuring and Forensic and Litigation Consulting segments. Adjusted EBITDA hit $55.5 million, or 11.9% of revenues, compared to $30.3 million, or 6.9% of revenues, in the prior year quarter. Shares closed at $48.26 that trading day.

The next time FCN was added to the #1 list was on May 4 after the company reported impressive fiscal 2018 first quarter results. Earnings of $1.04 handily beat the Zacks Consensus of 65 cents per share, while revenues of $498 million also beat our estimate and grew 11.5% year-over-year. Net income of $38.9 million compared to $14 million in the year ago quarter, largely due to higher revenues and a lower effective tax rate. Four months after first becoming a #1 pick, FCN stock was up over 19% to $57.51 per share.

FCN was added to the Strong Buy list a third time on August 3 after posting more strong results in its fiscal 2018 second quarter. The top and bottom line beat the Zacks Consensus Estimate, and revenues jumped 15.2% year-over-year. Net cash provided by operating activities grew to $34.6 million, while total debt of $375 million was down considerably from $485 million total debt load recorded in the prior year quarter. Eight months after first becoming a #1 stock, shares gained more than 64% to $79.23.

The consulting services company dropped back down to a #3 (Hold), and the stock has moved higher by 93% in the past one-year period.

This table shows the price performance of FCN, as well as the 12-month forward looking EPS estimate, from the time the stock first earned a Zacks Rank #1 (Strong Buy). During this stretch, FCN never moved lower than a Zacks Rank #3 (Hold).

 

By utilizing the Zacks Rank, investors are able to easily identify elite stocks that are best positioned to beat the market on a consistent basis, and how to hold those top stocks as they continue to grow.

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