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3 Stocks to Buy From the Prospering Consulting Services Industry
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Economic strength, encouraging service activities, and increased adoption and the success of the work-from-home trend have enabled Zacks Consulting Services industry players to gain from 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 Exponent, Inc. (EXPO - Free Report) in their portfolios.
About the Industry
Companies grouped under the Consulting Services industry 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 of 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 initiatives, identifying demand sources 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 a 1.9% rise 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 in 46 out 49 months.
Strong Demand Environment: The consulting services industry is one of those least affected by the pandemic and its after-effects. This is because, even in a volatile environment, 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 in the industry enables 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 #83. This rank places it in the top 33% 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 outperforms 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 us 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 36% compared with the S&P 500 composite’s rise of 20.9% and the broader sector’s rally of 15%.
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 32.46X, above the S&P 500’s 21.17X and the sector’s 24.05X.
Over the past five years, the industry has traded as high as 34.56X and as low as 21.40X, with a median of 27.63X, as the charts below show.
Price to Forward 12 Months P/E Ratio
3 Consulting Services Stocks to Consider
Gartner: This research and advisory firm is currently riding on higher compensation costs. The company’s research segment, which is its largest and most profitable segment, serves leaders across all functions of an enterprise in every industry and geography.
IT currently has a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for its 2024 bottom line has increased 1.7% in the past 90 days. Earnings are expected to rise 2.7% year over year in 2024. IT shares have gained 47.1% in the past year.
Exponent: This science and engineering consulting company is benefiting from its reactive business, driven by demand across the transportation, utilities and medical device sectors. The company’s proactive business is observing modest growth in the utility sector.
EXPO presently carries a Zacks Rank #2. The Zacks Consensus Estimate for its 2024 bottom line has increased marginally in the past 90 days. Earnings are expected to rise 5.7% year over year in 2024. EXPO shares have gained 18.6% in the past year.
Price and Consensus: EXPO
FTI Consulting: This business advisory services provider is benefiting from strong segmental revenues. The rise in Corporate Finance & Restructuring revenues has been driven by higher demand and realized bill rates for business transformation, and strategy and transaction services. On the Economic Consulting front, the company witnessed higher demand and realized bill rates for M&A-related antitrust and financial economic services. The Technology segment’s revenues are riding on higher demand for M&A-related second request services.
FCN currently carries a Zacks Rank #3. The Zacks Consensus Estimate for 2024 EPS has increased 3.2% in the past 90 days. Earnings are expected to rise 10% year over year in 2024. FCN shares have gained more than 18.1% in the past year.
Price and Consensus: FCN
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3 Stocks to Buy From the Prospering Consulting Services Industry
Economic strength, encouraging service activities, and increased adoption and the success of the work-from-home trend have enabled Zacks Consulting Services industry players to gain from 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 Exponent, Inc. (EXPO - Free Report) in their portfolios.
About the Industry
Companies grouped under the Consulting Services industry 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 of 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 initiatives, identifying demand sources 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 a 1.9% rise 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 in 46 out 49 months.
Strong Demand Environment: The consulting services industry is one of those least affected by the pandemic and its after-effects. This is because, even in a volatile environment, 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 in the industry enables 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 #83. This rank places it in the top 33% 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 outperforms 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 us 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 36% compared with the S&P 500 composite’s rise of 20.9% and the broader sector’s rally of 15%.
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 32.46X, above the S&P 500’s 21.17X and the sector’s 24.05X.
Over the past five years, the industry has traded as high as 34.56X and as low as 21.40X, with a median of 27.63X, as the charts below show.
Price to Forward 12 Months P/E Ratio
3 Consulting Services Stocks to Consider
Gartner: This research and advisory firm is currently riding on higher compensation costs. The company’s research segment, which is its largest and most profitable segment, serves leaders across all functions of an enterprise in every industry and geography.
IT currently has a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for its 2024 bottom line has increased 1.7% in the past 90 days. Earnings are expected to rise 2.7% year over year in 2024. IT shares have gained 47.1% in the past year.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price and Consensus: IT
Exponent: This science and engineering consulting company is benefiting from its reactive business, driven by demand across the transportation, utilities and medical device sectors. The company’s proactive business is observing modest growth in the utility sector.
EXPO presently carries a Zacks Rank #2. The Zacks Consensus Estimate for its 2024 bottom line has increased marginally in the past 90 days. Earnings are expected to rise 5.7% year over year in 2024. EXPO shares have gained 18.6% in the past year.
Price and Consensus: EXPO
FTI Consulting: This business advisory services provider is benefiting from strong segmental revenues. The rise in Corporate Finance & Restructuring revenues has been driven by higher demand and realized bill rates for business transformation, and strategy and transaction services. On the Economic Consulting front, the company witnessed higher demand and realized bill rates for M&A-related antitrust and financial economic services. The Technology segment’s revenues are riding on higher demand for M&A-related second request services.
FCN currently carries a Zacks Rank #3. The Zacks Consensus Estimate for 2024 EPS has increased 3.2% in the past 90 days. Earnings are expected to rise 10% year over year in 2024. FCN shares have gained more than 18.1% in the past year.
Price and Consensus: FCN