The Hackett Group Inc (NASDAQ:HCKT), is a US$596.3m small-cap, which operates in the IT services industry based in United States. As various enterprises look to technology to enable their own transformations, the opportunities for technology companies have widened extensively. However, more specifically in the IT service industry, tech analysts are forecasting a fairly unexciting growth rate of 8.3% in the upcoming year , and a whopping growth of 48.4% over the next couple of years. This rate is larger than the growth rate of the US stock market as a whole. Below, I will examine the sector growth prospects, and also determine whether Hackett Group is a laggard or leader relative to its tech sector peers.
What’s the catalyst for Hackett Group’s sector growth?
Despite all the opportunities, tech companies still face a host of challenges, including coping with an increasingly burdensome global regulation. In the previous year, the industry saw growth in the twenties, beating the US market growth of 15.3%. Hackett Group leads the pack with its impressive earnings growth of 38.1% over the past year. However, analysts are not expecting this industry-beating trend to continue, with future growth expected to be -6.1% compared to the wider IT services sector growth hovering of 8.3%, next year. As a future industry laggard in growth, Hackett Group may be a cheaper stock relative to its peers.
Is Hackett Group and the sector relatively cheap?
The IT services sector’s PE is currently hovering around 26.63x, higher than the rest of the US stock market PE of 19.86x. This means the industry, on average, is relatively overvalued compared to the wider market. However, the industry did return a higher 14.5% compared to the market’s 10.6%, which may be indicative of past tailwinds. On the stock-level, Hackett Group is trading at a lower PE ratio of 17.46x, making it cheaper than the average IT services stock. In terms of returns, Hackett Group generated 27.6% in the past year, which is 13.1% over the IT services sector.
Hackett Group is an tech industry laggard in terms of its future growth outlook. This is possibly reflected in the PE ratio, with the stock trading below its peers. If the stock has been on your watchlist for a while, now may be the time to dig deeper. Although the market is expecting lower growth for the company relative to its peers, Hackett Group is also trading at a discount, meaning that there could be some value from a potential mispricing. However, before you make a decision on the stock, I suggest you look at Hackett Group’s fundamentals in order to build a holistic investment thesis.
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Historical Track Record: What has HCKT’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Hackett Group? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.