April 12, 2019

HCKT – Market expectations are for HCKT to see material compression in Uniform ROA as the firm faces heightened competitive pressures

  • The Hackett Group, Inc. (HCKT:USA) is currently trading above corporate averages relative to UAFRS-based (Uniform) Earnings, with a 13.8x Uniform P/E. At these levels, the market is pricing in expectations for Uniform ROA to decline from 55% in 2018 to 26% in 2023, levels the firm hasn’t seen since before the 2009 recession
  • Specifically, markets appear to be pricing in expectations for competitive pressures to negatively impact profitability, and for HCKT’s product differentiation efforts for intellectual property-based strategic consulting, enterprise benchmarking, and best practices implementation to be insufficient to sustain demand for their services. Moreover, markets may be skeptical about the firm’s organic growth strategy, as HCKT has focused on improving legacy product offerings and promoting other services to existing clients, while other industry players have consolidated and grown through acquisitions
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