Does the Recent Acquisition Make ICF International a Bargain After a 31% Share Price Drop?

• Wondering if ICF International is an overlooked bargain or a value trap? If you're curious about what the numbers say, you're in the right place.
• ICF International's shares have pulled back sharply, losing 8.5% over the past week and 14.3% in the past month. They are now down 31.6% year-to-date.
• Recently, ICF International announced the acquisition of a leading energy and utilities consulting firm. This sparked new conversations around its long-term strategy. Some investors see this move as a potential catalyst for future growth, while others remain cautious given the ongoing market volatility.
• On the valuation front, the company scores a 5 out of 6 according to our valuation check, suggesting it might be undervalued by several measures. Let's walk through how different valuation tools stack up for ICF International, and stay tuned for an even smarter approach to understanding what these numbers really mean by the end of the article.

Find out why ICF International's -52.6% return over the last year is lagging behind its peers.

Approach 1: ICF International Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company’s true worth by projecting its future cash flows and discounting them back to today’s value. This approach attempts to capture what ICF International is fundamentally worth based on the cash it can generate in the years ahead.

For ICF International, the latest reported Free Cash Flow stands at $140 million. Analysts have projected the company’s Free Cash Flow out to 2027, estimating $129.6 million by that year. Beyond this, further projections are extrapolated, and by 2035, the model forecasts around $141.9 million in annual Free Cash Flow. These figures suggest a pattern of stability and modest growth over the next decade, which the model uses as a foundation for its intrinsic value calculation.

Bringing these cash flows back to present value, the DCF model estimates ICF International’s intrinsic worth at $128.30 per share. With the DCF discount indicating the shares are currently about 37.1% below this value, the stock appears significantly undervalued relative to what the underlying cash flows justify.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests ICF International is undervalued by 37.1%. Track this in your watchlist or portfolio, or discover 844 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for ICF International.

Approach 2: ICF International Price vs Earnings (PE)

The Price-to-Earnings (PE) ratio is widely considered one of the most important and versatile valuation tools for any consistently profitable company. It shows how much investors are willing to pay for each dollar of current earnings and tends to work best when future profits are reasonably predictable, as is the case for ICF International.

A company’s “normal” or “fair” PE ratio depends on a few factors. Higher expected growth justifies a higher multiple, since investors anticipate growing profits in the years ahead. Likewise, companies with lower risks or stronger profit margins often trade at a premium, while those facing uncertainty or lower margins typically command a discount.

Right now, ICF International trades at a PE ratio of 15x, well below the professional services industry average of 25x and even further below the average of its peers, which sits at 41x. On the surface, this suggests the stock is noticeably cheaper than typical alternatives in its sector.

However, comparing only to peers or industry averages is just the start. Simply Wall St's Fair Ratio goes further by blending factors like the company’s growth outlook, profit margins, risk profile, and even market capitalization. This holistic approach gives a more accurate estimate of what a fair PE should be for ICF International. That number is 19x.

Since the current PE ratio is below the Fair Ratio, this analysis points to ICF International being undervalued at recent prices relative to its true fundamentals.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1409 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your ICF International Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives.

A Narrative is a simple, structured way to bring your own perspective to a company’s numbers by turning your beliefs about its future into a clear story with forecasts and an estimated fair value.

Unlike traditional valuation tools, Narratives make it easy to connect a company’s story, such as growth drivers, risks, and catalysts, to specific financial forecasts and a dynamic fair value estimate, all in one place.

On Simply Wall St’s Community page, millions of investors can create and update their own ICF International Narratives, making this a practical and accessible approach for every experience level.

Narratives help guide buy or sell decisions by directly comparing your Fair Value with the current market price, and they are always up to date since they automatically adjust when new information, such as earnings or news, is released.

For example, some investors' Narratives are optimistic with a fair value as high as $133.0, while others are more conservative at $88.0. This demonstrates how personal perspectives on revenue, margins, or risk create actionable differences in decision-making.

Do you think there's more to the story for ICF International? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com