Here's Why You Should Hold on to Accenture (ACN) Stock Now
Strategic acquisitions and a solid cash position boost Accenture (ACN). Yet, higher talent cost is a headwind.
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 growth. The company has an expected long-term (three to five years) earnings per share growth rate of 10%. For 2021 and 2022, earnings are expected to grow at a rate of 17.8% and 11.7%, respectively, on a year-over-year basis.
The stock has rallied 44.4% in the past year compared with 49.5% growth of the industry it belongs to.
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What’s Driving the Stock?
Accenture's cash and cash equivalent balance of $10 billion at the end of third-quarter fiscal 2021 was well above the long-term debt level $62 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.
Acquisitions have been one of Accenture’s key growth strategies. These have enabled the company to enter new markets, diversify and broaden the product portfolio as well as maintain its leading position. In fiscal 2020, the company invested more than $1.5 billion in 34 acquisitions. The recent acquisition of Wabion is expected to strengthen Accenture’s competitive position in the market, considering the growing need for cloud applications and technology innovations.
Higher talent costs are hurting consulting services providers like Accenture. The consulting industry is labor intensive and heavily dependent on foreign talent.
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). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the broader Zacks Business Services sector include ManpowerGroup Inc. (MAN), Equifax (EFX) and Genpact Limited (G), each carrying a Zacks Rank #2 (Buy).
Long-term expected earnings per share growth rate for ManpowerGroup, Equifax and Genpact is pegged at 24.2%, 15.2% and 14.7%, respectively.
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