Accenture plc (ACN Quick QuoteACN - Free Report) has had an impressive run over the past year. The stock has gained 41.3%, outperforming the 38.6% and 27.7% growth of the industry and S&P 500 composite, respectively.

Accenture has an impressive Growth Score of B. This style score condenses all the essential metrics from the company’s financial statements to get a true sense of the quality and sustainability of its growth.

The company has an expected long-term earnings per share (three to five years) growth rate of 9%. Earnings are expected to increase 4.7% year over year in fiscal 2024 and 8.4% in fiscal 2025.

Factors That Bode Well

Accenture’s growth strategy focuses on delivering 360° value to its stakeholders, mainly through the use of technology. The company focuses on long-term growth through building a digital core with the help of cloud, data and AI, technology evolution and investment in talent. We believe this strategy positions Accenture as a trusted partner for its clients.

The company continues to witness strong demand for application modernization and maintenance, cloud enablement and cybersecurity-as-a-service. These trends are boosting Accenture’s managed services business across the world. Managed services revenues increased 11% year over year in fiscal 2023. We expect these revenues to grow 5.4% and 6.4%, respectively, in fiscal 2024 and 2025.

Accenture has a disciplined acquisition strategy focused on channelizing its business in high-growth areas, adding skills and capabilities, and deepening industry and functional expertise. The company spent $2.5 billion across 25 acquisitions in fiscal 2023.

Accenture recently agreed to acquire the cloud-native digital experience and data analytics company Mindcurv to expand Accenture Song’s commerce services globally. Another planned acquisition, Insight Sourcing, is expected to expand Accenture’s sourcing and procurement services for the consumer goods, retail, technology and industrial spaces.

Commitment to shareholder returns makes Accenture a reliable way for investors to compound wealth over the long term. In fiscal 2023, 2022, and 2021, the company paid $2.8 billion, $2.5 billion and $2.2 billion in dividends, respectively. We are expecting steady growth in income, which will translate to steady cash flow, enabling it to pay out stable dividends. Per our estimates, the company’s net income will grow 4.9% and 8.6%, respectively, in fiscal 2024 and 2025.

Some Risks

Higher talent costs due to a competitive talent market are hurting consulting services providers like Accenture. The industry is labor-intensive and heavily dependent on foreign talent. Moreover, while advancements in automation and AI offer massive opportunities to the industry, these technologies enable clients to comprehend and integrate new methods to improve performance, thereby creating uncertainty for consulting services firms.

Zacks Rank and Stocks to Consider

ACN currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader Business Services sector are Huron Consulting (HURN Quick QuoteHURN - Free Report) and Stantec (STN Quick QuoteSTN - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Huron Consulting has an expected earnings growth rate of 13.7% for 2024. The company has a trailing four-quarter earnings surprise of 25.9%, on average. The stock has appreciated 18.5% in the past year.

Stantec has an expected earnings growth rate of 15.8% for 2024. The company has a trailing four-quarter earnings surprise of 4.8%, on average. The stock has appreciated 43% in the past year.