Accenture: “Mouthwatering ROE”

10/10/2014 7:00 am EST

Focus: STOCKS

Mark Skousen

Editor, Forecasts & Strategies, High-Income Alert

Given the uncertain mood on Wall Street, private equity players look for opportunities in companies that have strong revenue and earnings but remain undervalued, observes Mark Skousen, editor of Private Equity Trader.

The consulting and outsourcing firm Accenture PLC (ACN) fits the bill perfectly. Last week, it reported better-than-expected revenues of $7.78 billion, up 10% year over year.

Earnings per share rose to $1.08, up 8% from the same quarter a year ago.

Growth was solid across the board in all four Accenture businesses: Consulting operations jumped 15%, company communications rose 14%, technology operations advanced 14%, and financial services climbed 10%.

“Our growth strategy is clearly resonating with the needs of our clients, which are the world’s leading companies,” Pierre Nanterme, Accenture’s chairman and CEO, said in a statement.

He adds, “We are investing to further strengthen our industry expertise, as well as to differentiate our capabilities, including in strategy, digital, technology, and operations. We have momentum in our business, and I am confident in our ability to continue driving sustainable, profitable growth and delivering value for our shareholders.”

Guidance suggests that Accenture will improve in all four categories during the next year. The stock is selling for less than two times sales and 15 times expected earnings in 2014-15.

It has a mouthwatering return on equity (ROE) of more than 54%. And it has virtually no debt. The company’s stock is down slightly for the year, but it could return to its record-making share prices in 2015.

I recommend that you buy Accenture at market today. For those willing to take greater risks, consider buying the February $85 call options.

Subscribe to Private Equity Trader here…

More from MoneyShow.com:

Fortress for Yield

BDCs: High Yields in Finance

Money Reporter Banks on Canada

Related Articles on STOCKS