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Have you been paying attention to shares of Information Services Group (III)? Shares have been on the move with the stock up 22.3% over the past month. The stock hit a new 52-week high of $6.93 in the previous session. Information Services Group has gained 107.6% since the start of the year compared to the -16.3% move for the Zacks Business Services sector and the 30% 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 August 9, 2021, ISG reported EPS of $0.12 versus consensus estimate of $0.07 while it beat the consensus revenue estimate by 7.72%.
For the current fiscal year, ISG is expected to post earnings of $0.31 per share on $269.42 million in revenues. This represents a 10.71% change in EPS on an 8.15% change in revenues. For the next fiscal year, the company is expected to earn $0.34 per share on $285.61 million in revenues. This represents a year-over-year change of 9.68% and 6.01%, respectively.
ISG 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.
ISG has a Value Score of B. The stock's Growth and Momentum Scores are A and A, respectively, giving the company a VGM Score of A.
In terms of its value breakdown, the stock currently trades at 22.2X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 22.3X versus its peer group's average of 21X. Additionally, the stock has a PEG ratio of 1.27. 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, ISG 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 ISG fits the bill. Thus, it seems as though ISG shares could still be poised for more gains ahead.
How Does ISG Stack Up to the Competition?
Shares of ISG have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also looking good, including Charles River Associates (CRAI), NV5 Global (NVEE), and FTI Consulting (FCN), all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.
The Zacks Industry Rank is in the top 12% of all the industries we have in our universe, so it looks like there are some nice tailwinds for ISG, even beyond its own solid fundamental situation.
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Information Services Group, Inc. (III) : Free Stock Analysis Report
Charles River Associates (CRAI) : Free Stock Analysis Report
FTI Consulting, Inc. (FCN) : Free Stock Analysis Report
NV5 Global, Inc. (NVEE) : Free Stock Analysis Report
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