Based in Dublin, Ireland, Accenture plc (ACN) is a professional services company that provides strategy and consulting, interactive technology and operations, and outsourcing services worldwide. In comparison, Globant S.A. (GLOB), which is headquartered in Luxembourg, operates as a technology services company worldwide. It offers transformational programs, ROI and cost efficiency, new revenue streams, and E-mission.
The information technology services market is expected to grow significantly in the coming months owing to increasing demand from almost every industry as part of widespread digital transformation efforts. Furthermore, because governments worldwide are reinstating lockdown and social distancing measures to limit the spread of the highly transmissible COVID-19 Delta variant, the demand for information technology services is expected to rise further in the near term. According to a Gartner, Inc. (IT) report, worldwide IT services spending is expected to reach $1.2 trillion in 2021, representing a 9.8% increase from 2020. So, both ACN and GLOB should benefit from the growing market.
ACN has gained 22.3% year-to-date, while GLOB returned 15.5%. Also, ACN’s 33% gains over the past nine months are higher than GLOB’s 24.2% returns. ACN is the clear winner with 24% gains versus GLOB’s 12.8% in terms of the past six months’ performance.
But which of these two stocks is a better buy now? Let’s find out.
On August 04, 2021, ACN agreed to acquire Blue Horseshoe, a supply chain management and strategy consulting firm and systems integrator that specializes in fulfillment and distribution solutions. The acquisition could deepen its customer-centric supply chain transformation capabilities.
On July 8, 2021, GLOB acquired an 80% stake in Walmeric, a firm that specializes in developing marketing automation technology combining lead management, online marketing, and sales enablement. This first product-oriented acquisition strengthens GLOB’s portfolio of digital marketing and digital sales.
Recent Financial Results
ACN’s revenue increased 21% year-over-year to $13.30 billion for its fiscal third quarter, ended May 31, 2021. The company’s operating income grew 24% year-over-year to $2.10 billion. In addition, its new bookings increased 39% year-over-year to $15.40 billion. Also, its EPS came in at $2.40, up 26% year-over-year.
GLOB’s revenue increased 41% year-over-year to $270.20 million for its fiscal first quarter, ended March 31, 2021. The company’s adjusted gross profit grew 41.5% year-over-year to $107.01 million, while its adjusted net income increased 52.5% year-over-year to $34.25 million. Also, GLOB’s adjusted EPS was $0.83, representing a 40.7% year-over-year rise.
Past and Expected Financial Performance
ACN’s revenue and EPS have grown at CAGRs of 6.5% and 12.7%, respectively, over the past three years. Analysts expect ACN’s revenue to increase 14% in its fiscal year 2021 and 10% in fiscal 2022. The company’s EPS is expected to grow 11.7% in the current year and 11.8% next year. And its EPS is expected to grow at an 11.8% rate per annum over the next five years.
In comparison, GLOB’s revenue and EPS have grown at CAGRs of 26.2% and 21.3%, respectively, over the past three years. The company’s revenue is expected to increase 39.4% in its fiscal year 2021 and 22.3% in fiscal 2022. Its EPS is expected to grow 38.4% in fiscal 2021 and 21.2% in fiscal 2022. Also, GLOB’s EPS is expected to grow at a 100% rate per annum over the next five years.
ACN’s $47.95 billion trailing-12-month revenue is significantly higher than GLOB’s $892.74 million. ACN is also more profitable, with 15.03% and 12.05% respective EBIT and net income margins, compared to GLOB’s 12.05% and 7.02%.
Furthermore, ACN’s ROE, ROA, and ROTC of 32.21%, 11.67%, and 20.79%, respectively, compare favorably with GLOB’s 9.20%, 6.47%, and 8.13%.
In terms of forward EV/EBITDA, GLOB is currently trading at 45.30x, which is 115.3% higher than ACN’s 21.04x. And GLOB’s 74.43x forward non-GAAP P/E ratio is 104.6% higher than ACN’s 36.37x.
So, ACN is the more affordable stock.
ACN has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. In comparison, GLOB has an overall C rating, which translates to Neutral. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.
Both ACN and GLOB have a B grade. This is justified given ACN’s 24% gains over the past six months and 2.2% gains over the past month, and GLOB’s 12.8% returns over the past six months and 14.2% gains over the past month.
ACN has an A grade for Quality. This is justified given ACN’s 16.83% trailing-12-month levered FCF margin, which is higher than the 12.50% industry average. In comparison, GLOB has a C grade for Quality, which is in sync with its 10.08% trailing-12-month levered FCF margin, which is lower than the 12.50% industry average. ACN also has a B grade for Stability, while GLOB has a C grade.
Of the 13 stocks in the Outsourcing – Tech Services industry, ACN is ranked #4. However, GLOB is ranked #18 of 43 stocks in the Internet – Services industry.
Beyond what we’ve stated above, we have also rated both the stocks for Sentiment, Value, and Growth. Click here to view all the ACN ratings. Also, get all the GLOB ratings here.
Rapid digital advancements are expected to drive the information technology services market’s growth significantly in the near future. And even though both ACN and GLOB are expected to gain in the long run, we think it is better to bet on ACN now because of its lower valuation and higher profitability.
Our research shows that odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Outsourcing – Tech Services industry here. Also, click here to access all the top-rated stocks in the Internet – Services industry.
ACN shares were trading at $320.55 per share on Tuesday afternoon, up $1.03 (+0.32%). Year-to-date, ACN has gained 23.87%, versus a 19.23% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal’s fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More…