Have you been paying attention to shares of FTI Consulting (FCN)? Shares have been on the move with the stock up 15% over the past month. The stock hit a new 52-week high of $108.14 in the previous session. FTI Consulting has gained 60.5% since the start of the year compared to the 28.7% move for the Zacks Business Services sector and the 31.7% return for the Zacks Consulting Services industry.
What's Driving the Outperformance?
The stock has a great 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 July 25, 2019, FTI Consulting reported EPS of $1.73 versus consensus estimate of $0.95 while it beat the consensus revenue estimate by 16.28%.
For the current fiscal year, FTI Consulting is expected to post earnings of $5.41 per share on $2.25 billion in revenues. This represents a 35.5% change in EPS on a 10.72% change in revenues. For the next fiscal year, the company is expected to earn $5.55 per share on $2.31 billion in revenues. This represents a year-over-year change of 2.49% and 3%, respectively.
FTI Consulting 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 they provide investors with an additional way to sort 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. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.
FTI Consulting has a Value Score of C. The stock's Growth and Momentum Scores are A and D, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 19.8X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 20.7X versus its peer group's average of 14.7X. 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 look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, FTI Consulting currently has a Zacks Rank of #1 (Strong 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 FTI Consulting passes the test. Thus, it seems as though FTI Consulting shares could have potential in the weeks and months to come.
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