What's Driving the Outperformance?
The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on August 9, 2021, ISG reported EPS of $0.12 versus consensus estimate of $0.07 while it beat the consensus revenue estimate by 7.72%.
For the current fiscal year, ISG is expected to post earnings of $0.37 per share on $269.42 million in revenues. This represents a 32.14% change in EPS on an 8.15% change in revenues. For the next fiscal year, the company is expected to earn $0.38 per share on $285.61 million in revenues. This represents a year-over-year change of 3.38% and 6.01%, respectively.
ISG may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
ISG has a Value Score of B. The stock's Growth and Momentum Scores are A and A, respectively, giving the company a VGM Score of A.
In terms of its value breakdown, the stock currently trades at 20.1X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 24X versus its peer group's average of 22X. Additionally, the stock has a PEG ratio of 1.15. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, ISG currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if ISG meets the list of requirements. Thus, it seems as though ISG shares could have potential in the weeks and months to come.
How Does ISG Stack Up to the Competition?
Shares of ISG have been moving higher, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also impressive, including Charles River Associates (CRAI), NV5 Global (NVEE), and FTI Consulting (FCN), all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.
The Zacks Industry Rank is in the top 15% of all the industries we have in our universe, so it looks like there are some nice tailwinds for ISG, even beyond its own solid fundamental situation.
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