Shares of Navigant Consulting, Inc. NCI have gained 17.3% in the past three months, outperforming the 4.9% rally of the industry it belongs to.
With a long-term expected EPS growth rate of 13.5% and a market cap of $921.5 million, Navigant seems to be a stock that investors should retain in their portfolios.
Factors That Bode Well
Navigant is investing in technology infrastructure to augment its technology-based service offerings. It has also invested in development programs to improve sales effectiveness and collaboration across the organization. Other focus areas include employee development, talent management and mentoring programs. We believe that these initiatives should add to Navigant’s ability to grow its business organically.
The company’s managed services business is currently in good shape driven by better execution in healthcare managed services, contribution from Health System Solutions (HSS) joint venture and a new Financial, Risk & Compliance Advisory (FSAC) segment managed services engagement. It is in currently a significant contributor to revenues before reimbursements (RBR).
The business represented 30% of RBR in the first quarter. The Energy segment continues to see strong demand from both commercial and government clients. The segment’s first quarter 2019 RBR increased 8% year over year.
Navigant’scommitment toward creating value for shareholders underline its confidence in business. It returned more than $55 million to shareholders through share repurchases and dividends in the first quarter and is confident about achieving its goal to return up to $175 million by August 2019.
Despite riding on significant growth prospects, Navigant is not free from overhangs. Higher talent costs due to a competitive talent market coupled with Trump’s stringent policies on immigration are hurting consulting services stocks. Nevertheless, we believe that a strong demand environment and improving operating efficiency bode well for Navigant.
Zacks Rank & Stocks to Consider
Navigant currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader Zacks Business Services sector are Broadridge BR, Accenture ACN and Automatic Data Processing ADP, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The long-term expected EPS (three to five years) growth rate for Broadridge, Accenture and Automatic Data Processing is 10%, 10.3% and 13%, respectively.
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