July 18, 2017 by InvestorDestination Team
As its name indicates FTI consulting (NYSE:FCN) offers consulting services. It offers diversified consulting services such as economic, restructuring, litigation, technology and strategic communications. It offers services globally. While macro economic growth will benefit its economic consulting services, economic downturn will fuel its restructuring business. So it has both pro and counter cyclical businesses. The company’s Forensics and litigation segment offers dispute advisory, investigations, forensic accounting, business intelligence assessments, and risk mitigation services to wide variety of clients including law firms, government entities, and companies. Its technology segment offers e-discovery, information management software and services.
Currently the company is facing challenges in its restructuring business. To mitigate the challenges it is restructuring its own business. It is reducing the head count but strengthening senior team to grow the business. However, it is expecting momentum in the second half of this year.
Retail challenges still continuing and transformation is not completed yet. So, there will be more restructuring in the retail sector. Apart from that the company offers restructuring services to variety of industries just not to retail or oil & gas. Many industries are cyclical and when there is a downturn, this company will be benefited. However as we mentioned earlier it also has pro-cyclical business. So upturn in the economic will also benefit the company. Recently the company has strengthened its balance sheet. Considering all these factors we believe the company is undervalued.
Its countercyclical and as well as pro-cyclical business will help diversify your portfolio and mitigate risk. Apart from that, this low beta stock can help bring down your portfolio’s beta.
The company is consistently repurchasing shares. However, it doesn’t have a track record of repurchasing shares only when the stock is undervalued. Recently the current CEO has promised to improve its share buyback strategy. However very rarely companies buy back shares only when it is undervalued. In general, companies’ management believes in its strategy. So management valuation might be too optimist.
So it is worth considering.
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