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Here's Why Investors Should Retain Accenture (ACN) Stock

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Accenture plc (ACN - Free Report) , 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 an expected long-term earnings per share (three to five years) growth rate of 10%. Further, earnings are anticipated to register 3% growth in 2020 and 6.6% in 2021.

Factors that Bode well

Acquisitions have been one of the key growth strategies for Accenture. They have enabled the company to enter new markets, diversify and broaden its product portfolio as well as maintain its leading position.

The recent acquisition of Revolutionary Security boosts Accenture Security’s potential to provide advanced cyber defence management. Also, the buyout of Yesler is enabling the company to enhance its account-based marketing, sales enablement, customer advocacy and marketing automation offerings.

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 as well as cloud enablement. In the second quarter of fiscal 2020, Accenture’s consulting and outsourcing revenues increased 7% and 6%, respectively, on a year-over-year basis.

Accenture PLC Revenue (TTM)

 

Accenture PLC Revenue (TTM)

Accenture PLC revenue-ttm | Accenture PLC Quote

 

Accenture has a strong balance sheet. As of Feb 29, the company had cash and cash equivalents of approximately $5.44 billion. A strong cash position enables the company to pursue strategic acquisitions, invest in growth initiatives and return cash through regular quarterly dividend payment and share repurchases.

Risks Associated

Higher talent costs due to a competitive talent market coupled with President Trump’s stringent policies on immigration are hurting consulting services providers like Accenture. The industry is labor intensive and heavily dependent on foreign talent.

Accenture continues to acquire a large number of companies. While this improves revenue opportunities, business mix and profitability, it also adds to integration risks. Moreover, frequent acquisitions are a distraction for management, which could impact organic growth, going forward.

Zacks Rank and Stocks to Consider

Accenture carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader Zacks Business Services sector are CoreLogic, Inc. , Elastic N.V. (ESTC - Free Report) and Blucora, Inc. . All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term expected EPS (three to five years) growth rate for CoreLogic, Elastic and Blucora are 11%, 26% and 20%, respectively.

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