Shares of Franklin Covey (FC) have been strong performers lately, with the stock up 7.4% over the past month. The stock hit a new 52-week high of $54.7 in the previous session. Franklin Covey has gained 9.3% since the start of the year compared to the -32.8% move for the Zacks Business Services sector and the -31.6% return for the Zacks Consulting Services industry.
What's Driving the Outperformance?
The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on November 2, 2022, Franklin Covey reported EPS of $0.39 versus consensus estimate of $0.27 while it beat the consensus revenue estimate by 6.71%.
For the current fiscal year, Franklin Covey is expected to post earnings of $1.24 per share on $288.77 million in revenues. This represents a -2.36% change in EPS on a 9.86% change in revenues.
Franklin Covey may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
Franklin Covey has a Value Score of B. The stock's Growth and Momentum Scores are A and D, respectively, giving the company a VGM Score of A.
In terms of its value breakdown, the stock currently trades at 40.9X current fiscal year EPS estimates, which is a premium to the peer industry average of 22.2X. On a trailing cash flow basis, the stock currently trades at 24.5X versus its peer group's average of 18.1X. Additionally, the stock has a PEG ratio of 1.49. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Franklin Covey currently has a Zacks Rank of #2 (Buy) thanks to favorable earnings estimate revisions from covering analysts.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Franklin Covey passes the test. Thus, it seems as though Franklin Covey shares could have potential in the weeks and months to come.
How Does FC Stack Up to the Competition?
Shares of FC have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Exponent, Inc. (EXPO). EXPO has a Zacks Rank of # 2 (Buy) and a Value Score of D, a Growth Score of B, and a Momentum Score of B.
Earnings were strong last quarter. Exponent, Inc. beat our consensus estimate by 11.90%, and for the current fiscal year, EXPO is expected to post earnings of $2.06 per share on revenue of $462.74 million.
Shares of Exponent, Inc. have gained 9.8% over the past month, and currently trade at a forward P/E of 50.03X and a P/CF of 51.25X.
The Consulting Services industry is in the top 25% of all the industries we have in our universe, so it looks like there are some nice tailwinds for FC and EXPO, even beyond their own solid fundamental situation.
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