Consulting services is one of the industries least affected by the pandemic. This is because, even amid a volatile situation, organizations require extensive advice on how to protect their employees, and stay closer to consumers and shareholders. The multi-billion-dollar industry has witnessed exponential growth since the 2008 financial crisis, enjoying a steady rate of revenues, profits, and cash-flow growth.
The Zacks-defined consulting services industry is currently in the top 35% of the Zacks Industry Rank. Year to date, the industry has provided 12.4% returns. Since it is ranked in the top half of Zacks Ranked Industries, we expect consulting services industry to outperform the market over the next 3 to 6 months.
The industry is in good shape, driven by a healthy demand environment for services. The U.S. economy remains solid despite continuous hiking of interest rate in the last one and half years by the Fed. This industry is one of the pioneers of remote working, which has become part of the new normal. The nature of work enables industry players to function efficiently through increased use of technology.
With the end of the pandemic, the focus of the industry is currently on channelizing money and efforts to more effective operational components, such as high-end technology, digital transformation, and data-driven decision-making.
Services are becoming more customer-centric through higher speed, incremental deliverables, and cloud technology. So, the consulting services industry is likely to witness healthy growth on internationalization and expansion of newer verticals, such as design thinking, digital and cybersecurity.
According to NMS Consulting, the market size of the management consulting industry is estimated to reach $330 billion globally in 2023. In the United States the industry has reached $65 billion with a growth rate of 7.7% per annum.
How to Pick the Right Stocks
At this stage, several stocks look attractive for future growth. However, a three-pronged picking method will make the task easy. First, select stocks with strong revenue and earnings potential for the rest of 2023. Second, these stocks should have seen positive earnings revisions in the last 30 days. Third, these stocks delivered positive earnings surprises in the last four reported quarters.
Five stocks have fulfilled our selection criteria. These are — Exponent Inc. EXPO, Huron Consulting Group Inc. HURN, CBIZ Inc. CBZ, FTI Consulting Inc. FCN and Franklin Covey Co. FC. Exponent and Huron Consulting currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The chart below shows the price performance of five above-mentioned stocks year to date.
Image Source: Zacks Investment Research
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
