1 Stock with a Ton of Upside Potential Right Now Wall Street analysts expect a 45% upside in Forrester Research (FORR). Given its strong fundamentals, favorable analyst estimates, and higher-than-industry profitability, it could be wise to buy the stock now....
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Wall Street analysts expect a 45% upside in Forrester Research (FORR). Given its strong fundamentals, favorable analyst estimates, and higher-than-industry profitability, it could be wise to buy the stock now. Read on.
Forrester Research, Inc. (FORR) is an independent research and advisory firm. The company operates through the Research, Consulting, and Events segments. Its primary subscription research product is Research, which offers clients access to its research designed for strategic decision-making.
FORR reported strong second-quarter results and reaffirmed its full-year guidance for adjusted operating margin and adjusted EPS. The company reported a contract value growth of 10% year-over-year to $349.40 million and a revenue growth of 15% in the last reported quarter.
FORR's Chairman and CEO, George F. Colony, said, "This was another strong quarter for us. We continued to experience double-digit contract value growth and delivered revenue growth of 15% for the period. Additionally, we had strong adjusted EPS performance. We also continued to generate positive cash flow, which allowed us to make investments in our sales, marketing, people, and technology. Given these strong results and our confidence in our ability to manage costs, we are reiterating our guidance for margins and adjusted EPS for the full year."
For fiscal 2022, the company has guided for total revenues of $535 million to $545 million, an adjusted operating margin of 11.5% to 12.5%, and an adjusted EPS of $2.25 to $2.35.
FORR's stock has declined 23.7% in price year-to-date and 1% over the past year to close the last trading session at $44.78. However, Wall Street analysts expect the stock to hit $65 in the near term, indicating a potential upside of 45.1%.
Here's what could influence the performance of FORR in the upcoming months:
Robust Financials
FORR's total revenues increased 15.2% year-over-year to $148.24 million for the second quarter ended June 30, 2022. The company's adjusted income from operations increased 41.8% year-over-year to $27.89 million. Also, its adjusted net income increased 51.4% year-over-year to $19.22 million. In addition, its adjusted EPS came in at $1, representing an increase of 51.5% year-over-year.
Favorable Analyst Estimates
Analysts expect FORR's EPS for fiscal 2022 and 2023 to increase 10% and 15.9% year-over-year to $2.30 and $2.67, respectively. Its revenues for fiscal 2022 and 2023 are expected to increase 9.4% and 8% year-over-year to $540.98 million and $584.58 million, respectively. It surpassed Street EPS estimates in each of the trailing four quarters.
Higher-than-industry Profitability
In terms of trailing-12-month gross profit margin, FORR's 58.80% is 101.4% higher than the 29.20% industry average. Likewise, its 12.08% trailing-12-month levered FCF margin is 242.1% higher than the industry average of 3.53%. Furthermore, the stock's trailing-12-month asset turnover ratio came in at 0.82%, compared to the industry average of 0.80%.
Mixed Valuation
In terms of forward non-GAAP PEG, FORR's 1.11x is 27.3% lower than the 1.53x industry average. Its forward EV/S of 1.57x is 8.4% lower than the 1.71x industry average.
However, the stock's 19.47x forward non-GAAP P/E is 15.6% higher than the 16.84x industry average. In addition, its 12.90x forward EV/EBITDA is 14.1% higher than the 11.30x industry average.
POWR Ratings Show Promise
FORR has an overall rating of A, equating to a Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. FORR has a B grade for Sentiment, consistent with favorable analyst estimates.
It has an A grade for Quality, consistent with its higher-than-industry profitability. It has a 0.92 beta, justifying its B grade for Stability.
FORR is ranked first out of 108 stocks in the Financial Services (Enterprise) industry. Click here to access FORR's Growth, Value, and Momentum ratings.
Bottom Line
FORR guided solid results for the fiscal year 2022. Wall Street analysts expect the stock to soar by 45% in the upcoming months. Given its strong financials, favorable analyst estimates, and higher-than-industry profitability, we think it could be wise to buy the stock now.
How Does Forrester Research, Inc. (FORR) Stack Up Against its Peers?
FORR has an overall POWR Rating of A, equating to a Strong Buy rating. This rating is superior to its peers within the Financial Services (Enterprise) industry, such as Everi Holdings Inc. (EVRI), South Plains Financial, Inc. (SPFI), and WNS (Holdings) Limited (WNS), which are graded B (Buy).
FORR shares were trading at $44.49 per share on Friday morning, down $0.29 (-0.65%). Year-to-date, FORR has declined -24.25%, versus a -10.21% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master's degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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