Independent market research and consulting firm Forrester Research (FORR), known for its thought leadership in areas like cloud migration, AI, cybersecurity, and customer experience, has experienced a prolonged slump in performance due to strategic changes. These changes, including product migration and salesforce restructure aimed at higher-tier prospects, have momentarily affected the company’s revenue and stock. However, this short-term market view overlooks Forrester’s solid potential for high margins via its subscription-based revenue model.
Now trading at a discount to industry peers, the company anticipates leveraging its broadened capabilities and revamped salesforce to recover and enhance its performance by 2025, making it an intriguing option for value investors in the consulting services industry.
Forrester Research’s Portfolio of Services
Forrester Research is a globally active independent research and advisory firm that counts 62% of the Fortune 100 among its clients. It operates in three distinct segments: Research, Consulting, and Events. The Research segment offers Forrester Decisions, Forrester Research, and SiriusDecisions Research as part of its primary subscription services.
The company’s Consulting segment delivers maturity assessments, best practice prioritization, strategy development, business case creation, technology vendor selection, organization structuring, content marketing strategies, sales tools, and advisory services.
In its Events segment, Forrester hosts events on various topics, including business-to-business marketing, sales and product leadership, customer experience, security and risk, new technology and innovation, and data strategies and insights. Products and services across all these segments are sold via a direct sales force operating in numerous locations.
The company estimates the total available market for research services exceeds $115 billion.
Forrester’s Recent Financial Results & Outlook
The company recently published its second-quarter results for 2024. Revenue of $121.83 million exceeded analysts’ estimates of $121.21 million, though it declined from $135.6 million in the same quarter in 2023. Adjusted net income was reported as $12.9 million, lower than 2023’s $18.1 million. Earnings per share of $0.68 fell short of consensus expectations of $0.71 and showed a year-over-year decline from $0.94.
Management has issued guidance for 2024, projecting total revenues between $425 million and $435 million, an adjusted operating margin of 8.5%- 9.5%, and adjusted diluted earnings per share of $1.37-$1.57.
Is FORR Stock a Buy?
The stock has been on a downward trend, shedding over 58% in the past three years. It trades at the low end of its 52-week price range of $16.14 – $32.78, though it shows positive price momentum, trading above the 20-day (18.55) and 50-day (18.25) moving averages. With a P/S ratio of 0.81x, the stock trades at a relative discount compared to the Consulting Services industry average of 3.81x.
Wall Street is following the company thinly, though the general outlook has been cautious. Based on the most recent analyst recommendation and price target, Forrester Research is rated a hold.
Final Analysis on FORR
Despite short-term setbacks, Forrester Research’s broadened capabilities and revamped salesforce are anticipated to drive performance upward by 2025. Trading at a relative discount compared to industry peers, Forrester’s solid potential for high margins via its subscription-based revenue model and engaging portfolio of research, consulting, and event services makes it an attractive prospect for value investors betting on a recovery in the consulting services sector.
