Over the last six months, ICF International’s shares have sunk to $77.40, producing a disappointing 19.2% loss - a stark contrast to the S&P 500’s 8.4% gain. This was partly due to its softer quarterly results and might have investors contemplating their next move.
Is now the time to buy ICF International, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Do We Think ICF International Will Underperform?
Despite the more favorable entry price, we’re cautious about ICF International. Here are three reasons we avoid ICFI, plus one stock we’d rather own.
1. Long-Term Revenue Growth Disappoints
A company’s long-term sales performance can indicate its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Unfortunately, ICF International’s 3.6% annualized revenue growth over the last five years was tepid. This fell short of our benchmark for the business services sector.
2. Backlog Declines as Orders Drop
We can better understand Government & Technical Consulting companies by analyzing their backlog. This metric shows the value of outstanding orders that have not yet been executed or delivered, giving visibility into ICF International’s future revenue streams.
ICF International’s backlog came in at $3.4 billion in the latest quarter, and it averaged 6.1% year-on-year declines over the last two years. This performance was underwhelming and shows the company is not winning new orders. It also suggests there may be increasing competition or market saturation. 
3. EPS Barely Growing
Analyzing the long-term change in earnings per share (EPS) shows whether a company’s incremental sales were profitable — for example, revenue could be inflated through excessive spending on advertising and promotions.
ICF International’s EPS grew at 7.1% compounded annual growth rate over the last five years. On the bright side, this performance was better than its 3.6% annualized revenue growth and tells us the company became more profitable on a per-share basis as it expanded.
Final Judgment
ICF International doesn’t pass our quality test. After the recent drawdown, the stock trades at 10.8× forward P/E (or $77.40 per share). This multiple tells us a lot of good news is priced in - you can find more timely opportunities elsewhere. We’d recommend looking at a safe-and-steady industrials business benefiting from an upgrade cycle.
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