We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
3 Stocks to Buy From the Booming Consulting Services Industry
Read MoreHide Full Article
Economic strength, encouraging service activities and increased adoption and the success of the work-from-home trend are enabling the Zacks Consulting Services industry players to support the demand environment.
Driven by these positives, investors interested in the industry would do well to keep stocks like Gartner, Inc. (IT - Free Report) , FTI Consulting, Inc. (FCN - Free Report) and Huron Consulting Group Inc. (HURN - Free Report) .
About the Industry
Companies grouped under the Consulting Services category offer professional advice in management, IT, human resources, environmental regulations, logistics and marketing, and real estate, serving multiple end markets. The space includes prominent names such as Accenture and Gartner. The focus within the industry is currently on channeling money and efforts toward more effective operational components, such as technology, digital transformation and data-driven decision-making. To position themselves suitably in the post-pandemic era and better utilize opportunities that an economic recovery will bring, service providers are increasing their efforts toward formulating and reassessing strategic initiatives, identifying sources of demand and targeting end markets.
What's Shaping the Future of the Consulting Services Industry?
Exponential Growth: This multi-billion-dollar industry has witnessed exponential growth since the 2008 financial crisis, enjoying a steady rate of revenues, profit and cash-flow growth. Consequently, the trend has enabled most industry players to pay out stable dividends.
Economic Recovery: The sector is a major beneficiary of the broader economy and service activities. According to the "advance" estimate released by the Bureau of Economic Analysis, GDP rose at an annual rate of 4.9% in the third quarter of 2023 compared with 2.1% growth in the second quarter. Economic activities in the non-manufacturing sector are in good shape. The Services PMI measured by the Institute for Supply Management has stayed above the 50% mark for the past 10 months, indicating continued expansion.
Strong Demand Environment: The consulting services industry is one of those least affected by the pandemic. This is because even amid a volatile situation, organizations require extensive advice on how to protect their employees and stay closer to consumers and shareholders. This industry is one of the earliest pioneers of remote working that has become part of the new normal. The nature of work enables industry players to function efficiently through the increased use of technology.
Zacks Industry Rank Indicates Bright Prospects
The Consulting Services industry, housed within the broader Business Services sector, currently carries a Zacks Industry Rank #73. This rank places it in the top 29% of 246 Zacks industries.
The group’s Zacks Industry Rank, which is 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 outperform the bottom 50% by a factor of more than two to one.
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 current valuation.
Industry's Price Performance
In the past year, the Consulting Services industry has outperformed the S&P 500 composite and the broader sector. The industry has gained 14.4% compared with the S&P 500 composite’s rise of 13.8% and the broader sector’s rally of 8.9%.
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 27.28X, above the S&P 500’s 19.27X and the sector’s 23.97X.
Over the past five years, the industry has traded as high as 37.08X and as low as 19.74X, with a median of 25.52X, as the charts below show.
Price to Forward 12 Months P/E Ratio
3 Consulting Services Stocks to Consider
We have presented three stocks that are well-positioned for near-term growth.
Huron Consulting: This provider of consultancy services is currently witnessing strength across its healthcare, education and commercial segments. Sales remain healthy, driven by continued demand for Consulting and Managed Services and Digital capabilities.
The Zacks Consensus Estimate for the company’s 2023 EPS suggests a 36.2% improvement from the year-ago reported number. The consensus estimate has increased by 3.3% in the past 60 days. HURN currently sports a Zacks Rank #1 (Strong Buy).The stock has gained 39.3% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
Price and Consensus: HURN
Gartner: The research giant has a large and diverse addressable market with low customer concentration, which helps it mitigate operating risks. The company offers timely, thought-provoking and comprehensive analysis. Its research reports are used by various companies across different sectors, strengthening its leading position in the market.
Consistency in rewarding shareholders through share buybacks not only instills investors’ confidence in the stock but also positively impacts earnings per share. The company’s bottom line continued to benefit from improvement in operational efficiency.
The Zacks Consensus Estimate for the company’s 2023EPS has increased 8.2% in the past 60 days. Gartner currently flaunts a Zacks Rank #1. The stock has gained 25% in the past year.
Price and Consensus: IT
FTI Consulting: This business advisory services provider carries a Zacks Rank of 2 (Buy) at present.
The company’s potential to club diverse issues like damage assessment, accounting, economics, statistics, finance and industry under a single roof looks impressive. FTI Consulting continues to pursue opportunities in areas such as business transformation services, transaction advisory business, restructuring, retail, construction, data and analytics, cyber business, information governance and international arbitration. This makes it an excellent partner for global clients dealing with international arbitration issues, generating consistent revenue growth from the existing international operations.
The Zacks Consensus Estimate for the 2023 EPS has moved 3.9% north in the past 60 days. The stock has appreciated 27.7% in the past year.
Price and Consensus: FCN
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
3 Stocks to Buy From the Booming Consulting Services Industry
Economic strength, encouraging service activities and increased adoption and the success of the work-from-home trend are enabling the Zacks Consulting Services industry players to support the demand environment.
Driven by these positives, investors interested in the industry would do well to keep stocks like Gartner, Inc. (IT - Free Report) , FTI Consulting, Inc. (FCN - Free Report) and Huron Consulting Group Inc. (HURN - Free Report) .
About the Industry
Companies grouped under the Consulting Services category offer professional advice in management, IT, human resources, environmental regulations, logistics and marketing, and real estate, serving multiple end markets. The space includes prominent names such as Accenture and Gartner. The focus within the industry is currently on channeling money and efforts toward more effective operational components, such as technology, digital transformation and data-driven decision-making. To position themselves suitably in the post-pandemic era and better utilize opportunities that an economic recovery will bring, service providers are increasing their efforts toward formulating and reassessing strategic initiatives, identifying sources of demand and targeting end markets.
What's Shaping the Future of the Consulting Services Industry?
Exponential Growth: This multi-billion-dollar industry has witnessed exponential growth since the 2008 financial crisis, enjoying a steady rate of revenues, profit and cash-flow growth. Consequently, the trend has enabled most industry players to pay out stable dividends.
Economic Recovery: The sector is a major beneficiary of the broader economy and service activities. According to the "advance" estimate released by the Bureau of Economic Analysis, GDP rose at an annual rate of 4.9% in the third quarter of 2023 compared with 2.1% growth in the second quarter. Economic activities in the non-manufacturing sector are in good shape. The Services PMI measured by the Institute for Supply Management has stayed above the 50% mark for the past 10 months, indicating continued expansion.
Strong Demand Environment: The consulting services industry is one of those least affected by the pandemic. This is because even amid a volatile situation, organizations require extensive advice on how to protect their employees and stay closer to consumers and shareholders. This industry is one of the earliest pioneers of remote working that has become part of the new normal. The nature of work enables industry players to function efficiently through the increased use of technology.
Zacks Industry Rank Indicates Bright Prospects
The Consulting Services industry, housed within the broader Business Services sector, currently carries a Zacks Industry Rank #73. This rank places it in the top 29% of 246 Zacks industries.
The group’s Zacks Industry Rank, which is 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 outperform the bottom 50% by a factor of more than two to one.
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 current valuation.
Industry's Price Performance
In the past year, the Consulting Services industry has outperformed the S&P 500 composite and the broader sector. The industry has gained 14.4% compared with the S&P 500 composite’s rise of 13.8% and the broader sector’s rally of 8.9%.
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 27.28X, above the S&P 500’s 19.27X and the sector’s 23.97X.
Over the past five years, the industry has traded as high as 37.08X and as low as 19.74X, with a median of 25.52X, as the charts below show.
Price to Forward 12 Months P/E Ratio
3 Consulting Services Stocks to Consider
We have presented three stocks that are well-positioned for near-term growth.
Huron Consulting: This provider of consultancy services is currently witnessing strength across its healthcare, education and commercial segments. Sales remain healthy, driven by continued demand for Consulting and Managed Services and Digital capabilities.
The Zacks Consensus Estimate for the company’s 2023 EPS suggests a 36.2% improvement from the year-ago reported number. The consensus estimate has increased by 3.3% in the past 60 days. HURN currently sports a Zacks Rank #1 (Strong Buy).The stock has gained 39.3% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
Price and Consensus: HURN
Gartner: The research giant has a large and diverse addressable market with low customer concentration, which helps it mitigate operating risks. The company offers timely, thought-provoking and comprehensive analysis. Its research reports are used by various companies across different sectors, strengthening its leading position in the market.
Consistency in rewarding shareholders through share buybacks not only instills investors’ confidence in the stock but also positively impacts earnings per share. The company’s bottom line continued to benefit from improvement in operational efficiency.
The Zacks Consensus Estimate for the company’s 2023EPS has increased 8.2% in the past 60 days. Gartner currently flaunts a Zacks Rank #1. The stock has gained 25% in the past year.
Price and Consensus: IT
FTI Consulting: This business advisory services provider carries a Zacks Rank of 2 (Buy) at present.
The company’s potential to club diverse issues like damage assessment, accounting, economics, statistics, finance and industry under a single roof looks impressive. FTI Consulting continues to pursue opportunities in areas such as business transformation services, transaction advisory business, restructuring, retail, construction, data and analytics, cyber business, information governance and international arbitration. This makes it an excellent partner for global clients dealing with international arbitration issues, generating consistent revenue growth from the existing international operations.
The Zacks Consensus Estimate for the 2023 EPS has moved 3.9% north in the past 60 days. The stock has appreciated 27.7% in the past year.
Price and Consensus: FCN