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At the current price of $22, what is the market’s view of Hackett Group’s future operating performance? To achieve average annual stock market performance of 9.0% over the next 6 years, Hackett Group shares will need to reach $36. Hackett Group’s stock price will need to reach $43 by 2029 to achieve upper quartile performance.
Executive Summary
- Key Hackett Group characteristics: very high profitability, above average financial strength, instability, and very low expected growth.
- High valuation, above market shareholder returns. Current valuation levels are high relative to the Hackett Group Peer Group. Recent market returns have outperformed the Hackett Group Peer Group. Total shareholder returns expected to significantly lag the overall equity market. Based on current investor expectations, Hackett Group shares should reach a level of $12 by 2029 — an -7.0% per year total shareholder return. A 2029 stock price of $36 would reflect median performance and a price of $43 would be required to reach upper quartile performance.
- Hackett Group’s past growth is average. Historical growth has been average relative to the Hackett Group Peer Group and forecasted growth is relatively below average. EPS Growth has been superior. Equity Growth, and Asset Growth have lagged. Hackett Group’s historical income statement growth has been higher than growth in the balance sheet. Revenue growth has exceeded asset growth; earnings growth has exceeded equity growth resulting in an improving return on equity. Hackett Group’s consensus growth expectations are lower than historical growth.
- Pretax ROA, Return on Equity, Asset Turnover, and Pretax Margin are all group leading. These factors have strengthened market perceptions of Hackett Group. The company has very high excess cash and will have to work to reinvest at attractive returns to support profitability and valuation.
- Hackett Group’s risk profile is neutral. Overall variability has been only average with only average revenue variability, very high E.P.S. variability, and only average stock price volatility. Financial Strength is only average and earnings’ expectations are very low. The debt/capital ratio has risen very significantly.
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