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Will the Bull Run Continue for Consulting Services Industry?

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Consulting service providers have been witnessing a solid run over the past year. Substantial surge in service activities driven by economic strength and stability, globalization, consolidation and digitization have fueled consulting service providers’ growth.

However, high cost of domestic talent due to a competitive labor market coupled with difficulty in attaining foreign talent due to Trump’s stringent policies on immigration remains a headwind for consulting firms.

Industry on Solid Footing

The financial health of the consulting services industry bears testimony to the fact that the scenario has improved considerably despite talent-related headwinds. Consulting services is currently a multi-billion dollar space, marked by consistent revenue and profit growth. This has enabled most industry players to steadily increase dividends.

Global players are increasingly expanding in areas beyond the United States and Europe to other industrialized regions and growing economies. They have increased moves to take advantage of trends such as AI, analytics, cybersecurity and digital. So, acquisitions and technology investments are rampant.

The Zacks Consulting Services industry has grown 30.9% over the past year, outperforming the 24.3% rally of the Zacks S&P 500 composite. It carries a Zacks Industry Rank (the average of the Zacks Rank of all the member stocks) of #108, which places it in the top 43% of more than 250 Zacks industries. This indicates solid near-term growth prospects.

The Future Holds Good

The market is expected to experience strong growth driven by internationalization and growth of new areas such as design thinking, digital and cybersecurity.

Further, consulting skills include speed, agility, analytics, business process redesign, and customer experience. With higher speeds, incremental deliverables, and cloud technology, consulting services are becoming more and more customer centric. This should keep the demand environment healthy.

According to statista, the global management consulting market is expected to grow to $344.38 billion in 2025 from $295.88 billion in 2020.

Stocks That Warrant a Look

Over the past year, six major consulting companies have had an impressive run on the bourse. FTI Consulting FCN, Accenture ACN and Huron Consulting HURN gained 69.4%, 40.2% and 35.4%, respectively. CBIZ CBZ, CoreLogic CLGX and CRA International (CRAI - Free Report) rallied a respective 34.2%, 28.7% and 27.9%.

Accenture is a Zacks Rank #2 (Buy) stock. The remaining companies mentioned herein carry a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The chart below shows year-to-date price performance of six major consulting services stocks compared with the industry and the Zacks S&P 500 composite.

 

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