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Consulting Services Outlook Bright Despite Coronavirus Crisis
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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.
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.
However, demand for consulting services is currently under near- to mid-term pressure. This is because the coronavirus pandemic has hit the economy hard, and slowed down both manufacturing and non-manufacturing activities.
Nevertheless, consulting services is one of the least-affected industries. This is because, amid such a volatile situation, organizations have increased their search for advice that can help them protect employees, and stay close to customers and shareholders. Further, the industry is one of the early pioneers of remote work. The nature of work allows industry players to get the job done through increased use of technology.
Zacks Industry Rank Indicates Encouraging Prospects
The Consulting Services industry, which is housed within the broader Business Services sector, currently carries a Zacks Industry Rank #10. This rank places it in the top 4% 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 Lags the S&P 500, Outperforms Sector
Over the past year, the Consulting Services industry has underperformed the S&P 500 composite but outperformed the broader sector.
While the industry has declined 5.6%, the broader sector and the S&P 500 composite have been down 8.7% and 1.7%, respectively.
One-Year Price Performance
Chart: 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 20.41X, above the S&P 500’s 19.53X but below the sector’s 23.64X.
Over the past five years, the industry has traded as high as 24.11X, as low as 18.67X and at a median of 20.9X, as the charts below show.
Chart: Price to Forward 12 Months P/E Ratio
Bottom Line
While the coronavirus-induced slowdown in manufacturing and non-manufacturing activities has, undoubtedly, marred the consulting industry, the digitization and adoption of technologies has become essential in helping it sail through these testing times.
Here are a few stocks from the industry that you may want to consider as these have a favorable Zacks Rank and have been witnessing upward estimate revisions.
FTI Consulting (FCN - Free Report) :This WA-based business advisory services company currently sports a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for current-year EPS has been revised 9% upward in the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
Price and Consensus: FCN
CBIZ, Inc. (CBZ - Free Report) : The stock of this OH-based professional business services provider also flaunts a Zacks Rank of 1, at present. The Zacks Consensus Estimate for 2020 EPS has remained unchanged over the past 60 days.
Price and Consensus: CBZ
Huron Consulting Group (HURN - Free Report) : This IL-based a professional services firm carries a Zacks Rank #2 (Buy), currently. The Zacks Consensus Estimate for ongoing-year EPS has moved 0.4% north in the past 60 days.
Price and Consensus: HURN
CoreLogic, Inc. : The stock of this property information, insight, analytics, and data-enabled solutions provider carries a Zacks Rank of 2. The Zacks Consensus Estimate for this year’s EPS has been revised 1% upward in 60 days’ time.
Price and Consensus: CLGX
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
Image: Bigstock
Consulting Services Outlook Bright Despite Coronavirus Crisis
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) and Gartner (IT - Free Report) .
Here are the industry’s three major themes.
Zacks Industry Rank Indicates Encouraging Prospects
The Consulting Services industry, which is housed within the broader Business Services sector, currently carries a Zacks Industry Rank #10. This rank places it in the top 4% 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 Lags the S&P 500, Outperforms Sector
Over the past year, the Consulting Services industry has underperformed the S&P 500 composite but outperformed the broader sector.
While the industry has declined 5.6%, the broader sector and the S&P 500 composite have been down 8.7% and 1.7%, respectively.
One-Year Price Performance
Chart: 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 20.41X, above the S&P 500’s 19.53X but below the sector’s 23.64X.
Over the past five years, the industry has traded as high as 24.11X, as low as 18.67X and at a median of 20.9X, as the charts below show.
Chart: Price to Forward 12 Months P/E Ratio
Bottom Line
While the coronavirus-induced slowdown in manufacturing and non-manufacturing activities has, undoubtedly, marred the consulting industry, the digitization and adoption of technologies has become essential in helping it sail through these testing times.
Here are a few stocks from the industry that you may want to consider as these have a favorable Zacks Rank and have been witnessing upward estimate revisions.
FTI Consulting (FCN - Free Report) : This WA-based business advisory services company currently sports a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for current-year EPS has been revised 9% upward in the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
Price and Consensus: FCN
CBIZ, Inc. (CBZ - Free Report) : The stock of this OH-based professional business services provider also flaunts a Zacks Rank of 1, at present. The Zacks Consensus Estimate for 2020 EPS has remained unchanged over the past 60 days.
Price and Consensus: CBZ
Huron Consulting Group (HURN - Free Report) : This IL-based a professional services firm carries a Zacks Rank #2 (Buy), currently. The Zacks Consensus Estimate for ongoing-year EPS has moved 0.4% north in the past 60 days.
Price and Consensus: HURN
CoreLogic, Inc. : The stock of this property information, insight, analytics, and data-enabled solutions provider carries a Zacks Rank of 2. The Zacks Consensus Estimate for this year’s EPS has been revised 1% upward in 60 days’ time.
Price and Consensus: CLGX
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
See their latest picks free >>