Chart of the Week: Accenture Benefits From Digital Transformation

March 19, 2021

We all hear a lot about “consultants” and their hectic work lives. But what is it they exactly do?

As investors, we should be aware that they help companies worldwide upgrade their internal operations by “consulting” with them on the best ways to do this.

One of the biggest consultants worldwide is Accenture Plc (NYSE: ACN), operating in 200 cities across 120 countries globally.

Headquartered in Dublin, Accenture competes with the likes of America’s “Big Three”; McKinsey, Bain and Boston Consulting Group (BCG).

It’s big business. Accenture earlier this week announced its second-quarter fiscal year 2021 results, delivering US$12.1 billion in revenue – up 5% year-on-year in local currency terms.

Accenture’s North American and Growth Markets segments both saw year-on-year revenue growth of 7% and 6%, respectively.

Structural tailwinds

What’s been driving this? Well, for one Accenture has been a clear beneficiary of companies’ realisation that “digital transformation” is a must in a post-Covid era.

That has coincided with offices starting to re-open and IT spending picking up pace, as the uncertainty that hung over the global economy last year finally starts to lift.

All this has driven a strong performance from Accenture shares over the past five years which, despite the temporary blip early last year, have been on an upward march (see below).

Beyond consulting, though, Accenture also has a burgeoning outsourcing business arm, helping corporates to cut costs by outsourcing digital services.

Accenture is already profitable, with an operating margin of 13.7% in its latest quarter, while delivering a 10% hike in its second-quarter dividend too.

Watch for this consulting giant to continue being one of the key non-tech winners from the longer term “digital transformation” trend.

Accenture share price 2016-2021 (US$)

Accenture share price

Source: Google Finance as of 19 March 2021

Disclaimer: ProsperUs Head of Content Tim Phillips doesn’t own shares of any companies mentioned.

Tim Phillips

Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth.

He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be. He is also a certified SGX Academy Trainer.

In his spare time, Tim enjoys running after his two young sons, playing football and practicing yoga.

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