CRA (CRAI)

Economic consulting firm CRA International (NASDAQ:CRAI) reported Q3 CY2025 results beating Wall Street’s revenue expectations, with sales up 10.8% year on year to $185.9 million. The company’s full-year revenue guidance of $744 million at the midpoint came in 1.3% above analysts’ estimates. Its non-GAAP profit of $2.06 per share was 14.4% above analysts’ consensus estimates.

Company Overview

Often retained for high-stakes matters with multibillion-dollar implications, CRA International (NASDAQ:CRAI) provides economic, financial, and management consulting services to corporations, law firms, and government agencies for litigation, regulatory proceedings, and business strategy.

The sector stands to benefit from ongoing digital transformation, increasing corporate demand for cost efficiencies, and the growing complexity of regulatory and cybersecurity landscapes. For those that invest wisely, AI and automation capabilities could emerge as competitive advantages, enhancing process efficiencies for the companies themselves as well as their clients. On the flip side, AI could be a headwind as well as the technology could lower the barrier to entry in the space and give rise to more self-service solutions. Additional challenges in the years ahead could include wage inflation for highly skilled consultants and potential regulatory scrutiny on outsourcing practices—especially in industries like finance and healthcare where who has access to certain data matters greatly.

CRA International's competitors include other economic and management consulting firms such as Compass Lexecon (part of FTI Consulting, NYSE:FCN), Analysis Group, Cornerstone Research, and larger professional services firms like Deloitte, PwC, and McKinsey & Company.

A company’s long-term sales performance is one signal of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years.

With $731.1 million in revenue over the past 12 months, CRA is a small player in the business services space, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and numerous distribution channels. On the bright side, it can grow faster because it has more room to expand.

As you can see below, CRA’s 8.3% annualized revenue growth over the last five years was solid. This shows it had high demand, a useful starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within business services, a half-decade historical view may miss recent innovations or disruptive industry trends. CRA’s annualized revenue growth of 9.7% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated.

This quarter, CRA reported year-on-year revenue growth of 10.8%, and its $185.9 million of revenue exceeded Wall Street’s estimates by 3.6%.

Looking ahead, sell-side analysts expect revenue to grow 2.1% over the next 12 months, a deceleration versus the last two years. This projection doesn't excite us and implies its products and services will see some demand headwinds.

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after subtracting all core expenses, like marketing and R&D.

CRA has done a decent job managing its cost base over the last five years. The company has produced an average operating margin of 10%, higher than the broader business services sector.

Analyzing the trend in its profitability, CRA’s operating margin rose by 1.8 percentage points over the last five years, as its sales growth gave it operating leverage.

This quarter, CRA generated an operating margin profit margin of 9.3%, down 1.7 percentage points year on year. This reduction is quite minuscule and indicates the company’s overall cost structure has been relatively stable.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

CRA’s EPS grew at an astounding 20.9% compounded annual growth rate over the last five years, higher than its 8.3% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into the nuances of CRA’s earnings can give us a better understanding of its performance. As we mentioned earlier, CRA’s operating margin declined this quarter but expanded by 1.8 percentage points over the last five years. Its share count also shrank by 16.5%, and these factors together are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For CRA, its two-year annual EPS growth of 27.6% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.

In Q3, CRA reported adjusted EPS of $2.06, up from $1.77 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects CRA’s full-year EPS of $8.19 to grow 4.9%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

CRA has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company’s free cash flow margin averaged 6.6% over the last five years, slightly better than the broader business services sector.

Taking a step back, we can see that CRA’s margin dropped by 9.5 percentage points during that time. If its declines continue, it could signal increasing investment needs and capital intensity.

CRA’s free cash flow clocked in at $35.9 million in Q3, equivalent to a 19.3% margin. This result was good as its margin was 2.3 percentage points higher than in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, leading to temporary swings. Long-term trends carry greater meaning.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Although CRA hasn’t been the highest-quality company lately, it historically found a few growth initiatives that worked. Its five-year average ROIC was 18.7%, higher than most business services businesses.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Uneventfully, CRA’s ROIC has stayed the same over the last few years. Given the company’s underwhelming financial performance in other areas, we’d like to see its returns improve before recommending the stock.

CRA reported $22.5 million of cash and $194.3 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $96.89 million of EBITDA over the last 12 months, we view CRA’s 1.8× net-debt-to-EBITDA ratio as safe. We also see its $1.49 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was good to see CRA beat analysts’ EPS expectations this quarter. We were also glad its revenue outperformed Wall Street’s estimates. Zooming out, we think this was a solid print. The stock traded up 3.4% to $184 immediately after reporting.

Updated: December 3, 2025 at 11:26 PM EST

A common mistake we notice when investors are deciding whether to buy a stock or not is that they simply look at the latest earnings results. Business quality and valuation matter more, so we urge you to understand these dynamics as well.

CRA is a fine business. To kick things off, its revenue growth was solid over the last five years. And while its cash profitability fell over the last five years, its astounding EPS growth over the last five years shows its profits are trickling down to shareholders. On top of that, its market-beating ROIC suggests it has been a well-managed company historically.

CRA’s P/E ratio based on the next 12 months is 21x. Looking at the business services landscape right now, CRA trades at a pretty interesting price. If you’re a fan of the business and management team, now is a good time to scoop up some shares.

Wall Street analysts have a consensus one-year price target of $249.50 on the company (compared to the current share price of $186.66), implying they see 33.7% upside in buying CRA in the short term.