The 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) , Gartner (IT - Free Report) , FTI Consulting (FCN - Free Report) and CoreLogic (CLGX - Free Report) .
Here are the industry’s three major themes.
- This multi-billion-dollar industry looks well poised for growth as globalization, consolidation, digitization and countercyclical demand, which have been the key catalysts over the past few years, will continue in the foreseeable future.
- Currently, the industry is enjoying a steady rate of revenues, profit and cash flow growth, enabling most players to steadily increase dividends.
- The industry is labor intensive and heavily dependent on foreign talent. Higher talent costs due to a competitive talent market coupled with Trump’s stringent policies on immigration are weighing on the industry’s performance.
Zacks Industry Rank Indicates Encouraging Prospects
The Zacks Consulting Services industry, which is housed within the broader Zacks Business Services sector, currently carries a Zacks Industry Rank #25. This rank places it in the top 10% 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 may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Outperforms S&P 500 and Sector
The Zacks Consulting Services industry has performed better than the broader Zacks Business Services Sector as well as the Zacks S&P 500 composite over the past year.
It has gained 30.2% over this period compared with the broader sector and the S&P 500’s increase of 28.7% and 26.4%, respectively.
One-Year Price Performance
Industry’s Current Valuation
On the basis of 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 23.96X, above the S&P 500’s 18.3X but below the sector’s 24.45X.
Over the past five years, the industry has traded as high as 23.96X, as low as 17.63X and at the median of 20.57X, as the charts below show.
Price to Forward 12 Months P/E Ratio
The industry is a great area to invest in right now, at least as long as the economy thrives. In fact, long-term prospects are also encouraging as major growth drivers are likely to gain traction in the foreseeable future.
So, while the more cautious of us might wait for a better entry point, here are some stock picks for the rest.
FTI Consulting: The stock of this WA-based business advisory services provider has gained 85.4% over the past year. The Zacks Consensus Estimate for current-year EPS has been revised 9% upward in the past 60 days. The stock carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Price and Consensus: FCN
Huron Consulting Group (HURN - Free Report) : The stock of this IL-based a professional services firm has gained 39.6% in the past year. The Zacks Consensus Estimate for current-year EPS has been revised 3.2% upward in the past 60 days. The stock carries a Zacks Rank #1.
Price and Consensus: HURN
CRA International, Inc. (CRAI - Free Report) : The stock of this MA-based provider of economic, financial, and management consulting services has gained 28.8% over the past year. The Zacks Consensus Estimate for current-year EPS has been revised 13.1% upward in the past 60 days. The stock carries a Zacks Rank #1.
Price and Consensus: CRAI
CBIZ, Inc. (CBZ - Free Report) : The stock of this OH-based professional business services provider has gained 39.6% in the past year. The Zacks Consensus Estimate for current-year EPS has been revised 0.8% upward in the past 60 days. The stock carries a Zacks Rank #2 (Buy).
Price and Consensus: CBZ