As the complexity in the business world increases, government regulated industries find it more difficult to maintain profitability and outsourcing becomes more convenient, and as a result, consulting companies seem poised for growth. In this field, three big names should be taken into account by fundamental, long-term investors: Accenture Plc (NYSE:ACN), Navigant Consulting, Inc. (NYSE:NCI), and CGI Group Inc. (USA) (NYSE:GIB).
Accenture Plc (NYSE:ACN): Strong position in the market
Accenture Plc (NYSE:ACN) is one of the main go-to names in the management and IT consulting business. With one of the biggest global operations in the field, companies think of Accenture when looking for unmatched capabilities and international presence, alongside its knowledge and expertise.
One of the keys to this firm’s success is its customer relations; as service providers, Accenture Plc (NYSE:ACN) establishes close and productive relationships with its clients, which trust it not only with sensitive information, but also with planning for the future. Given this situation, the stickiness of its client base is outstanding. Furthermore, the company has proven proactive, efficient, and effective. Therefore, new clients constantly feel attracted by its value proposal.
But, Accenture Plc (NYSE:ACN) is not only about consulting, but also about solving issues. As such, it has also become an outsourcing firm that has allowed other companies to save money by establishing operations in cheap-labor (but educated) countries like India, the Philippines, and Argentina. Its early incursion in this field has helped it generate a steady cash flow, as outsourcing, unlike consulting services, is usually stable and long-term, or at least recurring. By establishing its business in various countries, the firm is able to compete with offshore consultants and IT service companies that face lower costs than U.S.-based enterprises.
Although its stock trades a little above the industry average, at 19.4 times P/E (versus the 19.1 mean), I would recommend buying Accenture’s shares. With an industry leading human capital and profiting from other companies’ disruptive innovation without incurring in the costs and risks implied, its financials are among the strongest in the segment. Poised to deliver consistent growth — although not at the highest rates but rather around 11.5% annually — this is a good company for your retirement portfolio as a deterioration in its market conditions doesn’t seem anywhere near — actually, the situation is the opposite.
Navigant Consulting, Inc. (NYSE:NCI): A wide product portfolio
Navigant Consulting, Inc. (NYSE:NCI) is another interesting firm in the industry that counts a wide customer and consultant base (roughly 1,800 advisers). Formerly known as The Metzler Group, Navigant Consulting, Inc. (NYSE:NCI) is an established name in the specialty consulting segment, particularly among highly regulated or structurally changing industries, like energy, financial, and healthcare sectors.
With an expected EPS average annual growth rate of 12.5% for years to come, the firm offers compelling long-term prospects. I believe that the firm will outperform its peers based on its large consultant base and its long-standing, sticky, customer relations.
Although it focuses on litigation consulting, its product portfolio is quite wide, comprising four segments: (1) Disputes, Investigations & Economics, (2) Financial, Risk & Compliance Advisory, (3) Healthcare, and (4) Energy.