For Immediate Release
Chicago, IL – February 27, 2024 – Today, Zacks Equity Research discusses Stantec Inc. STN, FTI Consulting, Inc. FCN and CBIZ, Inc. CBZ.
Industry: Consulting
Link: https://www.zacks.com/commentary/2231495/3-stocks-to-buy-from-the-booming-consulting-services-industry
Economic strength, encouraging service activities, 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 Stantec Inc., FTI Consulting, Inc. and CBIZ, Inc. in their portfolio.
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 Bureau of Economic Analysis, GDP grew at an annual rate of 2.5% in 2023 compared with 1.9% growth in 2022. 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 13 months, indicating continued expansion.
Strong Demand Environment: The consulting services industry is one of those least affected by the pandemic and its after-effects. 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 #103. This rank places it in the top 41% of 251 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 39% compared with the S&P 500 composite's rise of 28.5% and the broader sector's rally of 25.6%.
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 29.91X, above the S&P 500's 21.02X and the sector's 26.49X.
Over the past five years, the industry has traded as high as 37.08X and as low as 20.69X, with a median of 25.87X.
3 Consulting Services Stocks to Consider
FTI Consulting: This business advisory services provider carries a Zacks Rank of 2 (Buy) at present.
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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 2024 EPS has moved nearly 1% north in the past 60 days. The stock has appreciated 17.3% in the past year.
CBIZ: This provider of financial, insurance and advisory services is currently benefiting from strong organic revenue growth, as well as contributions from recent acquisitions. The company is seeing strong demand for both recurring services and project-based advisory services.
The consensus estimate for 2024 EPS has increased 1.9% over the past 60 days. CBIZ currently carries a Zacks Rank #2. The stock has gained 47.7% in the past year.
Stantec: This global provider of e-professional services in the areas of infrastructure and facilities is currently benefiting from strong demand for its services and operational excellence. The third-quarter 2023 was the seventh consecutive quarter of organic net revenue growth from all regional and business operating units. Net revenues grew 9% organically.
The 160 basis points year-over-year growth in adjusted EBITDA margin was driven by high utilization, operating leverage and disciplined cost management.
The consensus estimate for 2024 EPS remained unchanged at $2.72 over the past 60 days. STN currently carries a Zacks Rank #2. The stock has appreciated 42.1% in the past year.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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