Consulting firms provide solutions that help companies respond effectively to major changes taking place in their markets, explains growth stock expert Taesik Yoon, editor of the Forbes Investor.
But when there’s uncertainty on what these changes may be, it can lead to reduced demand for such services as their clients await greater clarity. One recent victim of this is digital transformation consulting services provider Perficient (PRFT).
Hurt by elongated sales cycles and delays in new business awards by its healthcare customers stemming from uncertainty over the direction of public healthcare policy, the company’s revenues and earnings have declined over the past three quarters and its stock has dropped 25% in the past ten months.
The company’s guidance for the current quarter didn’t do it any favors either. Specifically, PRFT anticipates total Q2 revenues of $111.0-123.5 million and adjusted earnings of 29-31 cents per share — the midpoints of which both fell slightly shy of analysts’ expectations.
Yet despite the soft start 2017 and the underwhelming near-term outlook, PRFT provided several reasons to believe that the company will enjoy significantly better results in the second half and is likely to exit the year with strong momentum.
Chief among these is the fact that PRFT finally began seeing sales cycles from the healthcare market start to contract in March. More importantly, the company believes this shortening is sustainable for the remainder of the year.
The company also sees further payoff from its ongoing efforts to broaden and deepen its business consulting services. The benefits of this expanding market reach and the returning momentum in the healthcare market is evident in the strong bookings and business pipeline growth that PRFT enjoyed in Q1.
When you put all these favorable catalysts together, it’s not difficult to see why PRFT still stands by its full-year guidance for total revenues of $485-515 million and adjusted earnings of $1.17-1.31 per share.
At the midpoint, this indicates a substantial acceleration in both top and bottom line growth to 13.8% and 32.1%, respectively, for the second half of 2017. As this begins to materialize, we expect it to fuel a meaningful rebound in PRFT’s stock.
