ASGN - Embedded Expectations Analysis - 2021 05 21
ASGN Incorporated (ASGN:USA) currently trades near corporate averages relative to UAFRS-based (Uniform) earnings, with a 20.2x Uniform P/E, implying bearish expectations for the firm. Although management's concerns about consulting revenue growth, Apex margins, and their ECS segment suggest the potential for near-term headwinds, market expectations are too bearish, and equity upside is likely warrantedSpecifically, management may lack confidence in their ability to sustain their verticals' sequential growth, maintain commercial consulting revenue growth, and position their business for success. In addition, they may have concerns about the gross margin decline in their Apex segment, their revenue mix, and increasing SG&A expenses. Furthermore, they may be overstating the capabilities of their ECS segment, the strength of ECS' new business pipeline, and the strong performance of their strategic acquisitions. Moreover, management may lack confidence in their ability to advance their ESG initiatives and find acquisitions in commercial and government end markets
Although management's concerns about consulting revenue growth, Apex margins, and their ECS segment suggest the potential for near-term headwinds, market expectations are too bearish given the firm's strong secular growth drivers. As such, equity upside is likely warranted
ASGN provides information technology (IT) and other services in the technology, digital, creative, engineering and life sciences fields across commercial and government sectors. The company's segments are: Apex, which provides technical, digital, creative, scientific and engineering personnel for contract, contract-to-hire, and permanent placement positions to clients across the United States and Canada; Oxford, which provides staffing and permanent placement services in select skill and geographic markets in the United States and Europe; and ECS, which delivers solutions in cloud, cybersecurity, artificial intelligence, machine learning, application and IT modernization, science and engineering.
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