The Hackett Group Inc. (HCKT) is a leading enterprise benchmarking firm and intellectual property-based strategic consultancy to global companies, providing digital transformation services such as the implementation of leading enterprise cloud applications, workflow automation, and analytics that enable Digital World Class performance.
The company’s shares are up 15.3% over the past year and 4.9% over the past month to close its last trading session at $20.08.
In addition, each of the two Wall Street analysts that rated HCKT rated it Buy. The 12-month median price target of $28.00 indicates a 39.5% potential upside. The price targets range from a low of $26.00 to a high of $30.00.
Here's what could shape HCKT's performance in the near term:
Robust Financials
During the first quarter ended April 01, 2022, HCKT's total revenue increased 19.2% year-over-year to $75.66 million. Its operating income grew 51.5% year-over-year to $13.41 million. The company’s net income increased 65.1% from the prior-year quarter to $10.51 million, while its EPS amounted to $0.33.
In addition, its cash and cash equivalents came in at $47.7 million, representing an increase of 42.8% for the three months ended April 01, 2022.
Strong Profitability
HCKT's trailing-12-month net income margin of 15.8% is 242.1% higher than the industry average of 4.6%. Also, its ROC, ROE, and ROA are 409.3%, 357.6%, and 651.7% higher than their respective industry averages. Furthermore, its asset turnover ratio of 1.42% is 121.5% higher than the industry average of 0.64%.
Discounted Valuation
In terms of forward Non-GAAP P/E, the stock is currently trading at 13.78x, 22.4% lower than the industry average of 17.74x. Also, its forward EV/Sales of 1.98x is 30.1% lower than the industry average of 2.83x. Moreover, HCKT's forward Price/Sales of 2.13x is 26.1% lower than the industry average of 2.88x.
POWR Ratings Reflect Solid Prospects
HCKT has an overall A rating, equating to a Strong Buy rating in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight different categories. HCKT has an A grade for Quality and a B for Sentiment. HCKT's strong profitability is consistent with the Quality grade. In addition, the consensus ratings and price targets are in sync with the Sentiment grade.
Of the 10 stocks in the A-rated Outsourcing – Tech services industry, HCKT is ranked #1.
Beyond what I stated above, we have graded HCKT for Growth, Value, Stability, and Momentum. Get all HCKT ratings here.
Bottom Line
HCKT’s strong profitability, favorable consensus price targets, and ratings make it well positioned to witness solid upside in the near term. In addition, the analyst expects its revenues and EPS to increase by 7.3% and 11.5%, respectively, in the current fiscal year. So, we believe the stock could be a great buy now.
How Does The Hackett Group Inc. (HCKT) Stack Up Against its Peers?
HCKT has an overall POWR Rating of A, which equates to a Strong Buy rating. Check out this other stock within the same industry with an A (Strong Buy) rating: ServicesSource International Inc. (SREV).
HCKT shares were trading at $20.33 per share on Tuesday morning, up $0.25 (+1.25%). Year-to-date, HCKT has gained 0.12%, versus a -16.57% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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