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Here's Why You Should Add Accenture Stock to Your Portfolio

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Accenture plc (ACN - Free Report) has performed extremely well so far this year. The stock appreciated 37.8%, outperforming the 32.6% rally of the industry it belongs to.

So, if you haven’t taken advantage of this share price appreciation yet, we believe it’s time you add this financial transaction services stock to your portfolio as it has the potential to sustain the momentum in the near term.

Here are some of the factors that make it an attractive pick.

Solid Rank & VGM Score: Accenture currently carries a Zacks Rank #2 (Buy) and has a VGM Score of B. Our research shows that stocks with a VGM Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or 2 offer the best investment opportunities. Thus, the company appears to be a compelling investment proposition at the moment.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Northward Estimate Revisions: For 2019, 12 estimates moved north in the past 60 days versus no downward revision, reflecting analysts’ confidence in the company. Over the same period, the Zacks Consensus Estimate for fiscal 2019 inched up 0.3%.

Positive Earnings Surprise History: Accenture has an impressive earnings surprise history. The company outpaced the Zacks Consensus Estimate in the trailing four quarters, delivering a positive average earnings surprise of 5.3%.

Strong Growth Prospects: The Zacks Consensus Estimate for fiscal 2019 earnings is currently pegged at $7.33, reflecting year-over-year growth of 8.8%. Moreover, earnings are expected to register 8.7% growth in fiscal 2020. The stock has long-term expected earnings per share growth rate of 10.3%.

Growth Drivers: As enterprises continue their digital transformation efforts, the use of cloud services are expected to significantly increase going forward.

According to Gartner, the worldwide public cloud revenues are likely to grow 17.5% in 2019 to $214.3 billion, up from $182.4 billion in 2018. Per International Data Corporation (IDC), global spending on public cloud services and infrastructure market will witness a compounded annual growth rate (CAGR) of 22.3% during the 2019-2023 period.

Hence, Accenture’s strategy of enhancing its cloud capabilities through acquisitions and partnerships is a step in the right direction. A strong cash position allows the company to pursue such initiatives as well as return cash through regular quarterly dividend payment and share repurchases.

Accenture has been steadily gaining traction in its outsourcing as well as consulting businesses backed by high demand for services that can improve operating efficiencies and save costs. On the outsourcing front, the company continues to see strong demand to assist clients with the operation and maintenance of digital-related services and cloud enablement. In the first nine months of fiscal 2019, Accenture’s net revenues from outsourcing business increased 6% in U.S. dollars and 9% in local currency.

Accenture PLC Revenue (TTM)

On the consulting front, the company experiences strong demand for digital, cloud- and security-related services. In the first nine months of fiscal 2019, Accenture’s net revenues from consulting business increased 5% in U.S. dollars and 9% in local currency.

Other Stocks to Consider

Some other top-ranked stocks in the broader Zacks Business Services sector include Broadridge (BR - Free Report) , EVO Payments (EVOP - Free Report) and Visa (V - Free Report) , each carrying a Zacks Rank #2.

The long-term expected EPS (three to five years) growth rate for Broadridge, EVO Payments and Visa is 10%, 13.5% and 16.5%, respectively.

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