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Accenture Well Poised on Growth Trajectory: Find Out Why
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Accenture Plc. (ACN - Free Report) is gathering momentum from its positive earnings surprise history and strong fundamentals.
Also, shares of Accenture have been steadily trending higher on a year-to-date basis. The stock generated a return of 11.9%, which outperformed the Zacks Consulting industry’s gain of 10.8%.
What’s Behind the Momentum?
The company released better-than-expected first-quarter fiscal 2017 earnings on Dec 21, 2016. Its first-quarter fiscal 2017 earnings per share (‘’EPS”) of $1.58 beat the Zacks Consensus Estimate of $1.49. Also, both revenues and earnings increased on a year-over-year basis, reflecting increased focus on the Consulting and Outsourcing business, new bookings and continuous return of shareholders’ value.
The company posted a positive earnings surprise in the last four quarters with an average surprise of 5.3%. The company has a market cap of $72.6 billion with long-term earnings growth expectation of 10.25%.
Adding to the positives, Accenture’s remarkable run may continue next year as the company is currently trading at a lower price/earnings (P/E) multiple than the industry average. So, we believe that Accenture with its light forward P/E valuation of 19.9x compared with the industry average of 86.1x may be an optimistic bet. Moreover, the stock currently carries a VGM Style Score of “B,” which makes us hopeful about the stock’s future.
Acquisitions – A Key Growth Strategy
Most recently, Accenture announced that it has completed the acquisition of Defense Point Security, LLC DPS. However, the financial details of the transaction were kept under wraps.
The two companies had entered into an acquisition deal in October. The move marks Accenture’s efforts toward improving its government security portfolio. The latest acquisition is expected to expand Accenture’s federal services capabilities as well as strengthen its leadership position in providing cybersecurity solutions to the U.S. federal departments.
Accenture, continuing with its strategy to grow through acquisitions, also inked an agreement to acquire Arismore, a privately held company in France. The latest deal is expected to expand Accenture’s existing identity and access management services and security-as-a-service capabilities. It is also likely to strengthen its leadership position in France.
Considering the growing need for digital marketing, we expect Accenture’s investment in digital and marketing capabilities to boost long-term growth. It will also help the company in effectively competing with other digital marketing service providers such as International Business Machines Corp. (IBM - Free Report) , Dell and Deloitte.
Accenture pursues strategic acquisitions to diversify its offerings and expand operating markets. So far this year, the company has either completed or signed over 12 acquisition deals across various business segments, including IT security, CRM capabilities, strategy consulting, etc. Last year, it had closed 21 takeovers.
These acquisitions have enabled Accenture to foray into newer markets, diversify and broaden its product portfolio, and maintain its leading position. A strong cash balance of $4.08 billion and an operating cash flow of $1.08 billion at the end of first-quarter fiscal 2017 are expected to support the company’s inorganic growth strategy.
Bottom Line
Accenture’s long-term prospects look promising due to its sustained focus on new and innovative product launches, continuous investments in enhancing digital and marketing capabilities, as well as major acquisitions. Moreover, we believe that regular acquisitions will significantly contribute to the company's revenue stream.
However, increasing competition from Cognizant Technology Solutions (CTSH - Free Report) , a strained spending environment and Accenture’s broad European exposure may temper its growth to some extent.
A better-ranked stock in the technology sector is Marvell Technology Group Ltd. (MRVL - Free Report) , sporting a Zacks Rank #1. The stock has long-term expected earnings per share growth rate of 12.33%.
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Accenture Well Poised on Growth Trajectory: Find Out Why
Accenture Plc. (ACN - Free Report) is gathering momentum from its positive earnings surprise history and strong fundamentals.
Also, shares of Accenture have been steadily trending higher on a year-to-date basis. The stock generated a return of 11.9%, which outperformed the Zacks Consulting industry’s gain of 10.8%.
What’s Behind the Momentum?
The company released better-than-expected first-quarter fiscal 2017 earnings on Dec 21, 2016. Its first-quarter fiscal 2017 earnings per share (‘’EPS”) of $1.58 beat the Zacks Consensus Estimate of $1.49. Also, both revenues and earnings increased on a year-over-year basis, reflecting increased focus on the Consulting and Outsourcing business, new bookings and continuous return of shareholders’ value.
The company posted a positive earnings surprise in the last four quarters with an average surprise of 5.3%. The company has a market cap of $72.6 billion with long-term earnings growth expectation of 10.25%.
Adding to the positives, Accenture’s remarkable run may continue next year as the company is currently trading at a lower price/earnings (P/E) multiple than the industry average. So, we believe that Accenture with its light forward P/E valuation of 19.9x compared with the industry average of 86.1x may be an optimistic bet. Moreover, the stock currently carries a VGM Style Score of “B,” which makes us hopeful about the stock’s future.
Acquisitions – A Key Growth Strategy
Most recently, Accenture announced that it has completed the acquisition of Defense Point Security, LLC DPS. However, the financial details of the transaction were kept under wraps.
The two companies had entered into an acquisition deal in October. The move marks Accenture’s efforts toward improving its government security portfolio. The latest acquisition is expected to expand Accenture’s federal services capabilities as well as strengthen its leadership position in providing cybersecurity solutions to the U.S. federal departments.
Accenture, continuing with its strategy to grow through acquisitions, also inked an agreement to acquire Arismore, a privately held company in France. The latest deal is expected to expand Accenture’s existing identity and access management services and security-as-a-service capabilities. It is also likely to strengthen its leadership position in France.
Considering the growing need for digital marketing, we expect Accenture’s investment in digital and marketing capabilities to boost long-term growth. It will also help the company in effectively competing with other digital marketing service providers such as International Business Machines Corp. (IBM - Free Report) , Dell and Deloitte.
Accenture pursues strategic acquisitions to diversify its offerings and expand operating markets. So far this year, the company has either completed or signed over 12 acquisition deals across various business segments, including IT security, CRM capabilities, strategy consulting, etc. Last year, it had closed 21 takeovers.
These acquisitions have enabled Accenture to foray into newer markets, diversify and broaden its product portfolio, and maintain its leading position. A strong cash balance of $4.08 billion and an operating cash flow of $1.08 billion at the end of first-quarter fiscal 2017 are expected to support the company’s inorganic growth strategy.
Bottom Line
Accenture’s long-term prospects look promising due to its sustained focus on new and innovative product launches, continuous investments in enhancing digital and marketing capabilities, as well as major acquisitions. Moreover, we believe that regular acquisitions will significantly contribute to the company's revenue stream.
However, increasing competition from Cognizant Technology Solutions (CTSH - Free Report) , a strained spending environment and Accenture’s broad European exposure may temper its growth to some extent.
Currently, Accenture has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
A better-ranked stock in the technology sector is Marvell Technology Group Ltd. (MRVL - Free Report) , sporting a Zacks Rank #1. The stock has long-term expected earnings per share growth rate of 12.33%.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>