The Wall Street Buy List

"Actions speak louder than words."

It's an old saying, with more than a grain of truth to it. So why do the Wall Street firms get all the news coverage whenever they merely "initiate coverage" or "upgrade" their ratings on a company? After all, those are only words; what really matters is how the big boys act. Luckily for Wall Street watchers, finding out which professionals put their money where their corporate mouthpieces are has become relatively easy in this Internet age of ours. All we have to do is read MSN Money's list of which companies the Street is most actively buying.

But once we've done that, what next? After all, "Monkey see, monkey do" may not make for the soundest of investment strategies. That's where Motley Fool CAPS can help. The Fool's newest venture into the realm of collective intelligence collects ratings from more than 65,000 lay and professional analysts, then overweights the most successful raters' opinions to establish a "CAPS rating" from one to five stars (five being the best). If Wall Street's buying, and the smartest investors in Fooldom say they're right to do so, you should be paying attention.

Let's meet today's list of contenders:

Wall Street vs. Main Street
Main Street looks at Wall Street's buy list this week, and shrugs. Half the stocks get no more than so-so three-star ratings, and only one is viewed more favorably than average. That "one" is consulting firm ICF International, which advises government, commercial, and international clients on matters ranging from energy and the environment to health care to homeland security and defense.

While all that may sound pretty run-of-the-mill among "Beltway bandits," ICF does have one factor in its favor, that rival consultants like BearingPoint (NYSE: BE) and SAIC (NYSE: SAI) lack -- a perfect CAPS record of 147 outperform ratings (including 42 All-Stars), and not a single underperform rating to its name. What's behind all this unanimity? Let's find out, as we review...

The bull case for ICF International
NetscribeServcs believes that "increasing federal budget deficits, emergency preparedness for natural disasters and national security threats, rising energy demands and environmental changes" will create openings for firms like ICFI:

[It has] deep experience and ability to deliver innovative solutions, approaches to those issues.... In recent times, company has bagged $1.9mn contract with Southern California Edison to create high-performance homes that will lower homeowner energy bills, a five-year contract worth more than $20 million from a division of the Environmental Protection Agency to help organization reduce emissions and new three-year $2.6 million contract with the Transportation Research Board (TRB) to advance highway performance and safety.

dm982 muses: "Anyone in the business world knows what a gold mine consulting is for the consulting company...not the company being ripped off, *uh I mean*, 'consulted.' These guys keep winning big contracts and they appear to be focused in some good consulting fields that governments (the most unfocused and unorganized business of them all) need and will pay for."

Let's wrap up with some numbers, courtesy of 1picks, who crunched them for us just last week: "Good growth, great valuation (price-to-sales & PEG well below 1). 2006 stats: annual sales growth of 86.9%, annual net income growth of 487.6%."

Not bad. Not bad at all. But I doubt anyone seriously believes that ICF will be able to keep quintupling its profits year after year. In fact, the consensus of analysts polled calls for ICF's earnings to drop next year -- by a hefty 36%. Regardless, over the long term, those same analysts see ICF growing earnings strongly, with annual growth over the next five years averaging roughly 17%. For a firm with a trailing P/E of 11, and a trailing price-to-free cash flow of 8, that seems awfully cheap.

Time to chime in
With a valuation this cheap, there's little wonder that Wall Street is buying ICF shares hand over fist. But should you? Take a look at ICF and tell us what you think.