ICF International trades at $99.31 and has moved in lockstep with the market. Its shares have returned 14.1% over the last six months while the S&P 500 has gained 15.9%.
Is now the time to buy ICF International, or should you be careful about including it in your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Why Do We Think ICF International Will Underperform?
We don't have much confidence in ICF International. Here are three reasons we avoid ICFI and a stock we'd rather own.
1. Backlog Declines as Orders Drop
In addition to reported revenue, backlog is a useful data point for analyzing Government & Technical Consulting companies. 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 million in the latest quarter, and it averaged 1.2% 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. 
2. Revenue Projections Show Stormy Skies Ahead
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect ICF International’s revenue to drop by 2.3%, a decrease from its 5.9% annualized growth for the past five years. This projection doesn't excite us and implies its products and services will face some demand challenges.
3. Previous Growth Initiatives Haven’t Impressed
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).
ICF International historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 8%, somewhat low compared to the best business services companies that consistently pump out 25%+.
Final Judgment
ICF International doesn’t pass our quality test. That said, the stock currently trades at 14.7× forward P/E (or $99.31 per share). At this valuation, there’s a lot of good news priced in - we think there are better opportunities elsewhere. We’d suggest looking at a top digital advertising platform riding the creator economy.
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