Last Update 05 Feb 26

Fair value Increased 8.56%

ASGN: AI Services And Automation Risks Will Shape Fairly Valued Shares

Narrative Update on ASGN

The updated analyst price target for ASGN moves higher by about $4 to $52.83. This reflects analysts' revised assumptions for slightly stronger revenue growth, modestly higher profit margins, a small adjustment to the future P/E, and a lower discount rate following recent research that highlights both AI driven opportunities and automation risks.

Analyst Commentary

Recent research on ASGN reflects a mix of optimism around AI driven demand and caution around automation risk. This is feeding directly into updated price targets and assumptions on growth, margins, and valuation multiples.

Bullish Takeaways

Bullish analysts highlight management's Investor Day financial targets, which they describe as being above consensus expectations, as a key support for higher price targets and a stronger execution story.
There is a clear focus on ASGN's opportunity to help clients get measurable outcomes from AI and automation spending. Bullish analysts view this as a potential catalyst for revenue growth and improved profitability.
Positive revisions to price targets in recent notes are tied to assumptions for slightly stronger revenue trends, modestly higher profit margins, and a more supportive discount rate. Together, these factors lift estimated equity value.
Bullish analysts see ASGN's position in AI related services as a way to deepen client relationships. They link this to better visibility on future growth and support for current valuation multiples such as P/E.

Bearish Takeaways

Bearish analysts stress that automation can also reduce demand for certain services over time, and they explicitly flag automation risk as a counterbalance to the AI upside case in their valuation work.
Some recent research includes price target reductions, which are tied to more cautious assumptions around how quickly AI opportunities convert into realized revenue and margin gains.
There is concern that management's financial targets, while above consensus, may be challenging to achieve. This could put pressure on the shares if execution falls short of the current narrative.
Bearish analysts point to uncertainty around the long term impact of AI and automation on staffing and project based work, and this uncertainty is reflected in more conservative P/E and discount rate assumptions in their models.

What's in the News

ASGN plans to pursue acquisitions alongside organic growth, including its recently announced intent to acquire Quinnox. Management highlighted a disciplined M&A playbook and ongoing share repurchases as part of its capital allocation approach (Key Developments).
The company issued earnings guidance for the first quarter of 2026, expecting revenues of US$960 million to US$980 million, net income of US$25.8 million to US$29.4 million, and earnings per diluted share of US$0.62 to US$0.71 (Key Developments).
ASGN updated its guidance for the fourth quarter of 2025 and expects revenues to be at the high end of its previously announced range of US$960 million to US$980 million (Key Developments).
ASGN announced plans to transition to Everforth, a new parent brand that will bring together Apex Systems, Creative Circle, CyberCoders, ECS, GlideFast, and TopBloc. The change is expected in the first half of 2026 and is aimed at clearer market positioning, more cross selling, and greater operational efficiency (Key Developments).
The company launched its AI Factory, a four part framework designed to help enterprises move AI projects from concept to production. It includes tools for use case intake, citizen development, delivery, and monitoring across deployed AI applications (Key Developments).
ASGN entered a multi year 360 partnership with Salesforce, integrating Salesforce Agentforce into its digital engineering practice to support AI driven automation use cases such as a Recruiter Agent and to expand solutions across data & AI, cybersecurity, cloud & infrastructure, digital engineering, enterprise platforms, and customer experience (Key Developments).

Valuation Changes

Fair Value: risen slightly from US$48.67 to US$52.83, reflecting updated assumptions in the model.
Discount Rate: fallen modestly from 11.00% to 10.51%, which increases the present value of future cash flows in the analysis.
Revenue Growth: adjusted slightly higher from 1.85% to 1.88%, indicating a small change in expected top line expansion assumptions.
Net Profit Margin: moved up from 4.48% to 4.72%, implying a modest shift toward better modeled profitability.
Future P/E: increased slightly from 14.10x to 14.34x, signaling a small change in the valuation multiple applied to expected earnings.

Investments in AI, cloud, and cybersecurity, along with federal demand and strategic partnerships, are set to drive margin expansion and stable, recurring consulting revenue.
Persistent IT talent shortages support ASGN's pricing power in staffing and consulting, helping to sustain and grow gross margins through high-value, differentiated offerings.
Macroeconomic headwinds, industry disruption from automation and AI, margin pressures, intense competition, and uncertain returns on tech investments pose risks to revenue growth and earnings stability.

Catalysts

About ASGN

Engages in the provision of information technology (IT) services and solutions in the technology, digital, and creative fields for commercial and government sectors in the United States, Canada, and Europe.What are the underlying business or industry changes driving this perspective?

Ongoing investments in cloud, AI, and cybersecurity solutions-supported by robust demand from both commercial and federal clients-are driving a growing pipeline of high-margin consulting contracts, positioning ASGN to benefit from clients' digital modernization roadmaps, which is likely to accelerate future revenue growth and improve overall net margins.
Persistent demand for skilled IT professionals, combined with the skills gap in emerging technologies like AI and data analytics, strengthens ASGN's value proposition as a talent solutions provider, supporting sustained pricing power and higher-margin staffing and consulting offerings that should help protect and expand gross margin over time.
The recently enacted expansion in U.S. defense spending-specifically targeting areas such as AI, cloud migration, and cybersecurity where ASGN is well positioned-significantly grows federal contract backlog and is expected to drive more stable, recurring revenues in the federal segment, contributing to earnings stability and longer-term revenue visibility.
Strategic partnerships with technology leaders (e.g., AWS, Workday, Databricks) and investments in proprietary IP and accelerators create repeatable, scalable solutions that both enhance client value and drive operational efficiencies, supporting future improvements in operating margins and recurring high-quality consulting revenue.
The company's proactive internal adoption of AI for its own operations is beginning to yield productivity gains and cost optimization, suggesting potential for increased margin expansion as these efficiencies scale across the business.

ASGN Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming ASGN's revenue will grow by 2.5% annually over the next 3 years.
Analysts assume that profit margins will increase from 3.5% today to 4.5% in 3 years time.
Analysts expect earnings to reach $193.8 million (and earnings per share of $4.34) by about September 2028, up from $140.1 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $165.3 million.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 16.9x on those 2028 earnings, up from 16.4x today. This future PE is lower than the current PE for the US IT industry at 29.0x.
Analysts expect the number of shares outstanding to decline by 0.9% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 10.64%, as per the Simply Wall St company report.

ASGN Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

ASGN's year-over-year total revenues decreased by 1.4%, and its Commercial segment revenues fell by 2.4%, highlighting the company's exposure to cyclical slowdowns and suggesting that persistent macroeconomic headwinds or lengthening downturns in hiring and project spending could negatively impact future revenue growth and earnings.
The company's assignment revenues-linked to its traditional staffing business-declined by a notable 13.9% year-over-year, reflecting ongoing softness in contingent staffing that may persist if accelerating automation, AI adoption, or globalized talent pools further limit the demand for human IT staffing, ultimately compressing ASGN's addressable market and impacting top-line and net margins.
Federal segment gross margins declined by 140 basis points, driven by a greater mix of lower-margin software license revenues and the continued loss of higher-margin federal work (DOGE), suggesting increased vulnerability to shifts in contract mix, volatile government spending, and competition-factors that could limit overall profitability and margin recovery over the long term.
The company's margin expansion relies heavily on a greater mix of high-margin consulting and proprietary IP; however, ASGN operates in a highly competitive, fragmented landscape with significant risks from disruptive online freelance platforms, AI-driven hiring/matching tools, and potential regulatory pressures (e.g., worker classification), potentially reducing differentiation, driving down margins, and threatening earnings stability if these trends accelerate.
Sustained investment in AI-driven IP, upskilling, and technology platforms is intended to drive future growth and operating leverage, yet continued wage inflation, elevated SG&A costs ($216.8M, up from $205.6M YoY), and the risk that ongoing investments may not yield the expected scalability or margin gains could limit improvement in net income and free cash flow if execution or technology ROI falls short of projections.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $57.5 for ASGN based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $75.0, and the most bearish reporting a price target of just $44.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $4.3 billion, earnings will come to $193.8 million, and it would be trading on a PE ratio of 16.9x, assuming you use a discount rate of 10.6%.
Given the current share price of $52.37, the analyst price target of $57.5 is 8.9% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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