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Navigant (NCI) Shows Promise with Healthy Organic Growth

On May 30, Zacks Investment Research updated the research report on management services provider Navigant Consulting Inc. NCI.

Opportunities associated with healthcare reform continue to drive demand at Navigant as the industry seeks expertise to improve profitability and address increasing regulatory pressure for compliance. The demand for data analytics in healthcare across all markets is also growing as the Affordable Care Act and new technologies have given access to new data. The company is presently developing data analytic tools across multiple groups to meet the growing demand for technology-enabled solutions that can help clients address many of the market challenges.

Management is also taking steps to restructure its business in order to better align capacity with demand. Utilizing its strong cash flow generation capacity, the company continues to return capital to its shareholders, while investing heavily in technology, new capabilities and client channels. At the same time, Navigant is focusing on corporate development efforts to build a robust pipeline of investment opportunities, which is in line with its growth strategy. All these measures augur well for long-term growth.

Navigant operates in a highly labor intensive sector. Ideally, the sector should employ and run with a perfectly skilled workforce to keep up with the evolving business environment. However, since skilled workers are always in high demand, there remains a possibility of high attrition rate within the sector.

On the other hand, training of unskilled workers increases operational costs, thereby affecting margins. The business service sector is highly fragmented, with no single service provider possessing dominant market share to rule the industry. Hence, Navigant faces stiff competition from a number of peers while acquiring and maintaining clients for its different business segments, which could further reduce its profitability.

Nevertheless, we remain impressed with the inherent growth potential of this Zacks Rank #2 (Buy) stock. Some other favorably ranked stocks in the industry include Accenture plc ACN, CBIZ, Inc. CBZ and CEB Inc. CEB, each carrying the same Zacks Rank as Navigant.

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