Yahoo Movies Is CRA International Inc (NASDAQ:CRAI) Cheap And High Growth?
CRA International Inc (NASDAQ:CRAI), a US$405.8m small-cap, is a professional services company operating in an industry, whose performance is driven by other sectors including construction, financial and mining, making up a large chunk of revenues. Professional services analysts are forecasting for the entire industry, an extremely elevated growth of 31.9% in the upcoming year , and an enormous growth of 47.8% over the next couple of years. However this rate still came in below the growth rate of the US stock market as a whole. In this article, I’ll take you through the sector growth expectations, and also determine whether CRA International is a laggard or leader relative to its service sector peers.
Check out our latest analysis for CRA International
What’s the catalyst for CRA International’s sector growth?
Business conditions are changing quickly for the service industry, with increased market competition primarily from new entrants entering into the space. In the previous year, the industry saw growth in the teens, though still underperforming the wider US stock market. CRA International lags the pack with its lower growth rate of 6.4% over the past year, which indicates the company has been growing at a slower pace than its professional services peers. However, the future seems brighter, as analysts expect an industry-beating growth rate of 77.7% in the upcoming year. This future growth may make CRA International a more expensive stock relative to its peers.
Is CRA International and the sector relatively cheap?
The professional services sector’s PE is currently hovering around 26.05x, above the broader US stock market PE of 20.57x. This illustrates a somewhat overpriced sector compared to the rest of the market. However, the industry returned a similar 11.4% on equities compared to the market’s 10.4%. On the stock-level, CRA International is trading at a higher PE ratio of 32.53x, making it more expensive than the average professional services stock. In terms of returns, CRA International generated 6.5% in the past year, which is 4.9% below the professional services sector.
Next Steps:
CRA International’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. However, this higher growth prospect is also reflected in the company’s price, suggested by its higher PE ratio relative to its peers. If CRA International has been on your watchlist for a while, now may not be the best time to enter into the stock since it is trading at a higher valuation compared to other professional services companies. However, before you make a decision on the stock, I suggest you look at CRA International’s fundamentals in order to build a holistic investment thesis.
Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
Historical Track Record: What has CRAI’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of CRA International? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
