Looking for a tech stock poised to outperform the market in the next 12 to 18 months? Look no further than Accenture (ACN - Get Report) , which reports fiscal 2016 second-quarter earnings before the opening bell Thursday.
Accenture shares, at $108, are up 3.3% for the year to date and up 18% over the 52 weeks, besting the S&P 500 (SPX) during both spans. The company is projected to grow earnings at an average annual rate of 10% in the next five years, which would be twice the S&P 500 index.
Pay attention to the company's guidance Thursday.
For the quarter that ended in November, analysts, on average, expect earnings per share of $1.18 a share on revenue of $7.72 billion, translating to year-over-year growth of 9% and 3%, respectively. For the full year, ending August 2016, earnings are projected to climb 8% year over year to $5.22 per share, while revenue of $32.19 billion would mark a year-over-year increase of 3.7%.
Despite increasing competition from IBM (IBM - Get Report) and Infosys (INFY - Get Report) within the enterprise IT consulting space, Accenture has not only beaten Wall Street's revenue estimates in seven straight quarters, it has exceeded earnings estimates in five out of six quarters.
Thanks to management's focus on high-growth and high-margin ventures including strategic advertising and marketing -- an industry that is projected to grow to over $43 billion in the next two years -- Accenture is currently growing profits at twice the rate of revenue. In that vein, while ACN stock -- at around $108 and percentage points away from a new 52-week high -- may not scream bargain today, it's more important to focus on the value Accenture is working to create.
For instance, management's push into strategic advertising and marketing, which Forrester predicts will become a $103 billion market by the year 2020, puts Accenture on track to grow incremental earnings per share for the next four years. Accenture grabs 5% of that market, this equates to $5.15 billion on top of its $32 billion annual revenue.
With Accenture's profit margins climbing each quarter, this can add an additional 3 cents to 5 cents in incremental earnings per share by the end of fiscal 2017. When you consider this company pays an annual dividend yield of 2.03% and has added $5 billion to its share buyback plan, this is one of the safer bets in the tech space.