A Great Stock Thrives on Crisis

FTI Consulting fancies itself "the company behind the headlines." But with a soaring stock and earnings that only get better as the news gets worse, FTI has recently been commanding some headlines of its own.

You wouldn't guess FTI's influence from its unassuming headquarters. Nestled in a nondescript high-rise near Baltimore's Inner Harbor, FTI's offices look out on a 65-foot-tall neon guitar promoting the Hard Rock Cafe. But FTI's client list contains 66 of the Fortune 100 companies and 97 of the top 100 U.S. law firms. MF Global and Northern Rock are just a couple of the front-page names that have recently sought FTI's guidance.

FTI operates in five areas. Its corporate finance division works with strapped companies "to stop the bleeding and bring the company out of financial distress," says chief executive Jack Dunn. The economic consulting arm advises companies involved in acquisitions and mergers. A strategic communications unit handles public and investor relations for companies in crisis (it recently worked for Société Générale, the French investment bank that reported a $7.1-billion loss from fraudulent trading).

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The other two divisions often work in tandem. The technology arm licenses software that companies use to mine their electronic paper trail to "come up with all the e-mails people shouldn't have sent each other," says Donald Bisson, manager of Evergreen Mid Cap Growth, which owns FTI shares (symbol FCN). And the forensic and litigation consulting group does electronic detective work. That usually means snooping for signs of cooked books, but the division recently worked on the investigation into steroid use among Major League Baseball players.

FTI has been hitting home runs. Revenues expanded by 41% in 2007, to a bit more than $1 billion, 16% of it from abroad. Its bottom line reached $92 million in 2007, up 119% from 2006.

FTI can hardly keep up with the demand for its services. The company expanded its workforce by 94% over 2006 and 2007, and it currently employs 2,200 fee-generating consultants. FTI has already announced eight acquisitions since the start of 2008.

The good thing about expanding during an economic slowdown is that FTI can hire when everyone else is downsizing. "We're thriving from turnover around the world," Dunn says. The company seeks to lure "rock star" economists, lawyers and scientists, who in turn attract bright young minds looking for a challenge. "It's like the Yankees," Dunn says. "Everyone wants to be with the best."

FTI won't interest bargain hunters. The stock soared 121% in 2007, and over the past six months, insiders have dumped 84% of their shares. At its mid-April price of $63, FTI shares trade at 26 times estimated 2008 earnings. FTI is managing its growth with finesse, but you may want to let some of the froth fizzle before buying the stock.