Over the past six months, FTI Consulting’s shares (currently trading at $149.99) have posted a disappointing 9.8% loss, well below the S&P 500’s 12% gain. This was partly driven by its softer quarterly results and may have investors wondering how to approach the situation.
Is there a buying opportunity in FTI Consulting, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Why Is FTI Consulting Not Exciting?
Even though the stock has become cheaper, we don’t have much confidence in FTI Consulting. Here are three reasons why FCN doesn’t excite us, plus one stock we’d rather own.
1. Lackluster Revenue Growth
We at StockStory place the most emphasis on long-term growth, but within business services, a stretched historical view may miss recent innovations or disruptive industry trends. FTI Consulting’s recent performance shows its demand has slowed as its annualized revenue growth of 3% over the last two years was below its five-year trend. We’re wary when companies in the sector see decelerations in revenue growth, as it could signal changing consumer tastes aided by low switching costs. 
2. EPS Barely Growing
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
FTI Consulting’s EPS grew at an unimpressive 4.1% compounded annual growth rate over the last five years, lower than its 8.2% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.
3. New Investments Fail to Bear Fruit as ROIC Declines
ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
On average, FTI Consulting’s ROIC decreased by 2 percentage points annually each year over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.
Final Judgment
FTI Consulting isn’t a terrible business, but it doesn’t pass our bar. Following the recent decline, the stock trades at 14.6× forward P/E (or $149.99 per share). Beauty is in the eye of the beholder, but we don’t really see a big opportunity at the moment. We’re pretty confident there are superior stocks to buy right now. We’d suggest looking at one of our top digital advertising picks.
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