Accenture plc
ACN
has an impressive
Growth Score
of A. This style score condenses all the essential metrics from the company’s financial statements to get a true sense of quality and sustainability of its growth. The company has expected long-term earnings per share (three to five years) growth rate of 10%. For 2021 and 2022, earnings are expected to grow at a rate of 13.7% and 10.6%, respectively, on a year-over-year basis.
The stock has rallied 38.6% in the past year compared with 41.2% growth of the
industry
it belongs to.
Image Source: Zacks Investment Research
What’s Driving the Stock?
Acquisitions have been one of Accenture’s key growth strategies. These have enabled the company to enter new markets, diversify and broaden its product portfolio as well as maintain its leading position. In fiscal 2020, the company invested more than $1.5 billion on 34 acquisitions. The recent acquisition of strategic management consulting firm Homburg & Partner is expected to boost Accenture’s strategy and process capabilities predominantly in the areas of commercial strategy, sales and pricing methods, and knowledge. This will better position the company for client’s value creation.
Accenture’s cash and cash equivalent balance of $9.17 billion at the end of the second-quarter fiscal 2021 was well above the long-term debt level $59.8 million, underscoring that the company has enough cash to meet its debt burden. A strong cash position allows the company to pursue strategic acquisitions, invest in growth initiatives and return cash through regular quarterly dividend payment and share repurchases.
Some Risks
Higher talent costs are hurting consulting services providers like Accenture. The consulting industry is labor intensive and heavily dependent on foreign talent.
Moreover, while frequent acquisitions improve revenue opportunities, business mix and profitability, they add to integration risks. Also, they are a distraction for management, which could impact organic growth.
Zacks Rank and Stocks to Consider
Accenture currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader Zacks
Business Services
sector are
Equifax Inc.
EFX
, Cross Country Healthcare
CCRN
and
Charles River Associates
CRAI
, each carrying a Zacks Rank #2 (Buy). You can see
the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here
.
The long-term expected earnings per share (three to five years) growth rate for Equifax, Cross Country Healthcare and Charles River is pegged at 14%, 10.5% and 15.5%, respectively.
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