Navigant Continues to Focus on Portfolio Restructuring
Headquartered in Chicago, IL, Navigant is a provider of specialized consulting services. Its staff of seasoned consultants and industry leaders provides litigation support and investigative services, claims management and analysis, corporate finance services, discovery services, government contracting services as well as operations advisory and management process outsourcing services.
Opportunities associated with healthcare reform continue to drive demand as the industry seeks expertise to improve profitability and address increasing regulatory pressures for compliance. The demand for data analytics in healthcare across all markets is also growing, given the access to new data as a result of the Affordable Care Act and new technologies. The company is presently developing data analytic tools across multiple groups to meet the growing demand for technology-enabled solutions that can help clients address many of the market challenges.
Management is taking steps to restructure the business in order to better align the capacity with demand. Utilizing its strong cash flow generation capacity, the company continues to return capital to its shareholders and making investments in technology, new capabilities and client channels. At the same time, Navigant is focusing on corporate development efforts to build a robust pipeline of investment opportunities which is in line with its growth strategy. All these measures augur well for the long-term growth.
Navigant has outperformed the Consulting Services industry with an average return of 29.16% against a negative 0.72% for the latter, over a period of 90 days. In addition, over the same time frame, earnings estimates for the current year increased 7.9%.
However, Navigant continues to face challenges on both the domestic and international fronts. This is primarily attributable to the difficulties in managing and staffing foreign operations, relatively limited new assignments, currency fluctuations and regulatory stringencies due to the uncertainty in the global economy. At the same time, Navigant relies heavily on a group of senior-level consultants and business development professionals. The future success of the company is largely dependent on its ability to successfully recruit and retain its people. Competition for skilled consultants is intense and retention-related issues are a constant challenge for the company. The consulting industry has low barriers to entry and it is easier for consultants to start their own businesses. While hiring and retention of personnel are keys to driving revenues, full-time equivalent levels and related consultant compensation in excess of demand drive additional costs and can negatively impact the company's margins.
Navigant currently carries a Zacks Rank 2 (Buy). Some other favorably ranked stocks in the sector include LifeLock, Inc. LOCK , WageWorks, Inc. WAGE and Verisk Analytics, Inc. VRSK , each carrying a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .
LifeLock is currently trading at a forward P/E of 40.8x and has beaten estimates thrice over the trailing four quarters, for an average positive earnings surprise of 27.4%.
Verisk has a long-term earnings growth expectation of 11.6% and is currently trading at a forward P/E of 26.5x.
WageWorks has a long-term earnings growth expectation of 15.0% and is currently trading at a forward P/E of 80.5x.
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