Low Debt Aids Charles River (CRAI) Amid High Talent Cost
Charles River CRAI currently banks on its strong balance sheet and measures to boost shareholders’ value.
Charles River Associates reported mixed third-quarter 2021 results, with earnings beating the Zacks Consensus Estimate and revenues missing the same. Quarterly non-GAAP EPS came in at $1.44, which beat the Zacks Consensus Estimate by 34.6% and increased 89.5% year over year. Revenues of $136.4 million lagged the consensus mark by 1.2%, but increased 12% year over year.
The stock has surged 123.8% in the past year compared with a 58.5% rally of the industry it belongs to.
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How is Charles River Faring?
Charles River’s total debt-to-total-capital ratio was 0.03 at the end of third-quarter 2021 compared with 0.19 at the end of the previous quarter. A declining debt-to-capitalization ratio indicates that the proportion of debt to finance the company’s assets is falling and so is the risk of insolvency. Cash and cash equivalent balance of $20 million at the end of the quarter was far above its current debt level of $6 million.
We are impressed with Charles River’s consistent record of returning value to shareholders in dividends and share repurchases. In 2020, 2019 and 2018, the company repurchased shares worth $13.4 million, $18.1 million and $27.9 million, respectively. It paid out $7.39 million, $6.54 million and $5.78 million dividends in 2020, 2019 and 2018, respectively. Such moves indicate that the company’s commitment to create value for shareholders and underline its confidence in its business. These initiatives not only instill investors’ confidence but also positively impact earnings per share.
Higher talent costs due to a competitive talent market are hurting consulting services companies like Charles River. The industry is labour intensive and heavily dependent on foreign talent. While advancements in automation and AI offer a massive opportunity to the industry, these technologies enable clients to comprehend and integrate new methods to improve performance, thereby creating uncertainty for consulting services firms.
Charles River carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1(Strong Buy) Rank stocks here.
Stocks to Consider
Some better-ranked stocks in the broader Zacks Business Services sector are Avis Budget CAR, Cross Country Healthcare, Inc. CCRN and FactSet Research Systems Inc. FDS.
Avis Budget has an expected earnings growth rate of around 398.1% for the current year. CAR has a trailing four-quarter earnings surprise of 76.9%, on average.
Avis Budget’s shares have surged 702% so far this year. CAR has a long-term earnings growth of 27.5%. CAR sports a Zacks #1 Rank.
Cross Country Healthcare has an expected earnings growth rate of around 397.8% for the current fiscal year. CCRN has a trailing four-quarter earnings surprise of 75%, on average.
Cross Country Healthcare’s shares have surged 199.7% so far this year. CCRN has a long-term earnings growth of 12%. CCRN sports a Zacks #1 Rank.
FactSet Research has an expected earnings growth rate of around 9% for the current fiscal year. FactSet has a trailing four-quarter earnings surprise of 2.4%, on average.
FactSet’s shares have surged 45.3% so far this year. FDS has a long-term earnings growth of 8.5%. FDS carries a Zacks #2 (Buy) Rank.
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