FTI Consulting Inc (FCN, Financial) recently experienced a daily gain of 17.64%, and a 3-month gain of 10.12%. With a current Earnings Per Share (EPS) (EPS) of 6.57, there's a question to be answered: Is the stock modestly overvalued? This article will provide a comprehensive valuation analysis to answer this question. So, let's dive in.
Company Overview
FTI Consulting Inc is a professional business advisory firm that generates its sales through five major segments: corporate finance and restructuring, forensic and litigation consulting, economic consulting, technology, and strategic communications. Its customer base spans across various sectors, including construction, energy and power, environmental, financial institutions, healthcare and life science, insurance, real estate and infrastructure, retail and consumer products, telecom, media, and technology. The majority of the company's revenue is derived from serving customers in the United States.
The current stock price of FTI Consulting (FCN, Financial) is $216.38 per share, with a market cap of $7.40 billion. Comparatively, the GuruFocus Fair Value (GF Value) estimate is $184.66, suggesting that the stock may be modestly overvalued. The following income breakdown provides a clearer picture of FTI Consulting's financial performance:
Understanding GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is calculated based on historical trading multiples, a GuruFocus adjustment factor based on the company's past performance and growth, and future business performance estimates. The GF Value Line on our summary page provides an overview of the fair value at which the stock should ideally be traded.
According to the GF Value calculation, FTI Consulting (FCN, Financial) appears to be modestly overvalued. Consequently, the long-term return of its stock is likely to be lower than its business growth.
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Financial Strength
Companies with poor financial strength pose a high risk of permanent capital loss to investors. To avoid this, it's crucial to review a company's financial strength before deciding to purchase shares. Key indicators of financial strength include the cash-to-debt ratio and interest coverage. FTI Consulting has a cash-to-debt ratio of 0.36, which ranks worse than 66.41% of 1048 companies in the Business Services industry. Despite this, the overall financial strength of FTI Consulting is 8 out of 10, indicating strong financial health.
Profitability and Growth
Investing in profitable companies, especially those demonstrating consistent long-term profitability, poses less risk. FTI Consulting has been profitable 9 out of the past 10 years. Over the past twelve months, the company reported a revenue of $3.20 billion and an EPS of $6.57. Its operating margin is 10.02%, which ranks better than 65.44% of 1056 companies in the Business Services industry. Overall, GuruFocus ranks FTI Consulting's profitability at 8 out of 10, indicating strong profitability.
Growth is a crucial factor in a company's valuation. FTI Consulting's 3-year average annual revenue growth is 11.1%, which ranks better than 69.65% of 972 companies in the Business Services industry. However, the 3-year average EBITDA growth rate is 2.8%, ranking worse than 65.56% of 845 companies in the same industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) is another way to determine its profitability. The ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. The WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, FTI Consulting's ROIC is 9.32, and its cost of capital is 5.75.
Conclusion
In conclusion, FTI Consulting (FCN, Financial) appears to be modestly overvalued. The company's financial condition is strong, and its profitability is robust. However, its growth ranks worse than 65.56% of 845 companies in the Business Services industry. To learn more about FTI Consulting stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
