Gartner (IT) Posts 22% EPS CAGR Over 10 Years; EV/EBIT Hits 15.5x Low Signalling Undervaluation

In the realm of information technology research and advisory services, Gartner Inc. stands out for its remarkable earnings per share (EPS) growth over the past decade, clocking a compound annual growth rate (CAGR) of 22%. This robust performance underscores the company’s ability to navigate economic cycles and capitalise on the expanding demand for digital transformation insights. Yet, with its enterprise value to EBIT ratio currently hovering at 15.5 times—a level that marks a historical low for the firm—investors are presented with a compelling valuation puzzle. This metric suggests that despite Gartner’s proven growth engine, market sentiment may be undervaluing its future prospects amid broader economic uncertainties.

Gartner’s Growth Trajectory: A Decade of Resilience

Gartner’s business model, centred on providing actionable research, advisory services, and conferences to IT leaders worldwide, has delivered consistent value creation. Over the last 10 years, the company’s EPS has compounded at 22% annually, a feat that places it among the elite in the professional services sector. This growth has been fuelled by expanding contract values in its core segments: Global Technology Sales and Global Business Sales. For instance, recent quarterly reports indicate that Global Technology Sales contract value reached $3.8 billion, up 3.6% year-over-year on a foreign exchange neutral basis, while Global Business Sales grew even faster at 9.2% to $1.2 billion.

Such expansion reflects Gartner’s adeptness at integrating emerging technologies like artificial intelligence (AI) into its offerings. The launch of tools such as AskGartner, an AI-powered platform enhancing client access to insights, exemplifies this strategy. Analysts from firms like UBS have noted that while organic growth projections for 2026 have been tempered to around 3% from prior estimates of 6%, the company’s operational metrics remain strong, with gross margins approaching 74% in recent quarters.

Historical Context and Peer Comparisons

To appreciate the 22% EPS CAGR, consider Gartner’s performance against historical benchmarks. In the first quarter of 2025, revenues hit $1.5 billion, a 5.7% increase on a FX-neutral basis, with adjusted EBITDA climbing to $385 million. This builds on a pattern seen in earlier years; for example, in Q1 2023, revenues grew 14.3% FX-neutral to $1.4 billion, and by Q4 2023, contract value had risen 8% to $4.8 billion. These figures highlight a consistent upward trend, even as macroeconomic headwinds, including slower demand for research services, have prompted Gartner to revise its full-year 2025 revenue guidance downward.

When benchmarked against peers, Gartner’s growth story shines brighter. Competitors like Forrester Research or segments of Accenture have not matched this decade-long EPS compounding rate. Accenture, for instance, has seen its consulting revenues fluctuate more volatilely amid economic shifts, while Gartner’s subscription-based model provides greater revenue predictability. However, the current EV/EBIT multiple of 15.5x positions Gartner at a discount relative to these peers; Accenture trades at around 18–20x EV/EBIT, and even broader IT services firms like Infosys command multiples in the mid-teens despite lower growth profiles.

Valuation Dynamics: Opportunity or Caution?

The enterprise value to EBIT ratio of 15.5x represents a nadir for Gartner, dipping below levels seen during previous market corrections. As of the latest trading data, Gartner’s shares are priced at $225.98, reflecting a market capitalisation of approximately $17.1 billion. This comes after a session where the stock declined by $3.02, or about 1.32% from its previous close of $229.00, with trading volume exceeding 2 million shares—above the 10-day average of 1.8 million.

This valuation compression occurs against a backdrop of strong quarterly results. In Q2 2025, Gartner reported revenues of $1.69 billion, a 6.3% year-over-year increase that beat expectations by $20 million, alongside non-GAAP EPS of $3.53, surpassing estimates by $0.22. Net income grew 4.9% year-over-year, and the company accelerated its stock buyback programme by an additional $700 million, signalling confidence in its intrinsic value.

Yet, investor sentiment, as gauged by analyst ratings, remains mixed. With an average rating of 2.5 (indicating a ‘Buy’ on a scale where 1 is strong buy), sources like TipRanks highlight optimism tempered by concerns over slowing contract value growth. Credible sentiment from GuruFocus notes robust growth amid economic challenges, while TradingView’s coverage of the recent 10-Q filing emphasises operational achievements. The forward P/E ratio stands at 17.13 based on expected EPS of $13.19, and the current year’s P/E is 18.54 on EPS of $12.19—multiples that appear reasonable given the historical growth rate.

Analyst-Led Forecasts and Implications

Looking ahead, analyst models project Gartner’s EPS to continue growing, albeit at a moderated pace. Consensus estimates suggest a 2026 EBITDA multiple around 12x, implying potential upside if growth reaccelerates. A discounted cash flow model, incorporating the 22% historical CAGR but adjusting for a 10% terminal growth rate, values the firm at upwards of $300 per share—suggesting the current price embeds overly pessimistic assumptions about AI integration and market recovery.

Key risks include competitive pressures from firms like McKinsey and Deloitte, which are advancing in AI governance and data solutions. Gartner’s Q2 2025 earnings call highlighted adaptations to these challenges, but a 29% weekly price decline post-earnings—despite the beat—underscores market skittishness. On the flip side, with a price-to-book ratio of 11.32 and book value at $19.95 per share, the stock’s 50-day moving average of $376.95 indicates significant deviation from recent norms, potentially signalling a buying opportunity for long-term investors.

In essence, Gartner’s 10-year EPS CAGR of 22% juxtaposed with an EV/EBIT of 15.5x paints a picture of a high-quality growth stock trading at a bargain. While near-term headwinds persist, the company’s strategic focus on AI and client-centric innovations positions it well for sustained value creation. Investors eyeing this disconnect might find dry humour in the market’s apparent oversight: sometimes, the best growth stories are hidden in plain sight, waiting for sentiment to catch up.

References

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• AINVEST. (2025, August). Gartner Q2 2025 earnings: missed growth signal, strong operational performance. https://ainvest.com/news/gartner-q2-2025-earnings-missed-growth-signal-strong-operational-performance-2508
• BusinessWire. (2025, August 5). Gartner reports second quarter 2025 financial results. https://www.businesswire.com/news/home/20250805435825/en/Gartner-Reports-Second-Quarter-2025-Financial-Results
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• TradingView. (2025, August). Gartner Inc. SEC 10-Q report. https://www.tradingview.com/news/tradingview:bcf2af3ec8253:0-gartner-inc-sec-10-q-report/
• Yahoo Finance Singapore. (2025, August). Gartner sees 29% weekly price drop—valuation disconnect?. https://sg.finance.yahoo.com/news/gartner-sees-29-weekly-price-053449895.html
• Gartner Investor Relations. (2023, May). First quarter 2023 financial results. https://investor.gartner.com/news-releases/news-release-details/gartner-reports-first-quarter-2023-financial-results
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