Tech market research firm Gartner is forming a cup with handle on the strength of earnings. This is Tuesday's IBD 50 Stocks to Watch pick.
The company has turned the recession into a profit, evaluating industry trends that can mark the difference between survival and failure during inflationary and recessionary times.
IT stock has a rising relative strength line and trades well above its 50- and 200-day moving averages. It has formed a long cup-with-handle base, although the handle is deeper than desired after Tuesday's stock market action. The buy point is 317.73, according to MarketSmith chart analysis.
On Aug. 2, Gartner reported earnings of $2.85 per share that easily beat Wall Street expectations.
The company is hoping to do it again in Q3, with FactSet analysts looking for a profit of $1.87 per share on sales of $1.3 billion, more than double Q3 2021's performance.
In addition, Gartner boasts an annual EPS growth rate of 43% over the last three years, as well as a 7% sales growth rate.
Gartner has a 94 Composite Rating and holds the No. 2 rank among its peers in the Commercial Services-Market Research industry group, behind FactSet Research Systems. The group is ranked No. 68 out of 197 industry groups, according to IBD Stock Checkup.
Gartner Market Research: Digital Technologies Driving Prosperity
Gartner says the prominence of digital technologies will decrease in coming years.
"However, this isn't a sign of the decline of digital, but rather a prerequisite for digital technologies to become a sustainable engine of economic prosperity," the company advised last month.
"As hype around digitalization fades and strategies driven by fear of digital disruption subside, we will begin to see better business decisions that lead to real investment in productive assets, productivity gains, growth in GDP, and improvements in standards of living across the globe," said Ed Gung, Managing Vice President, Research with the Gartner Research Board.
Those global changes could translate into increased profitability for this blue-chip market research firm.
"The rate of change in the world is the fastest I've ever seen," said CEO Gene Hall in announcing earnings last month. "Gartner continues to get even more agile. We're generating new insights to address timely impressing issues, such as leveraging and emerging technologies, optimizing costs, attracting and retaining talent in a hybrid world, managing cybersecurity risk and more."
Gartner is also buying back stock, with $479 million paid for 5.5% of outstanding shares in the last quarter..
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