The company’s Infosys Ltd ADR (NYSE:INFY) 3.0 strategy failed to improve its fortunes, and we believe that the company will go back to its core business of ADM. We believe that the return of Narayan Murthy will help Infosys gain its lost ground. So we are bullish on Infosys.
Cognizant Technology Solutions Corp (NASDAQ:CTSH) has been able to achieve a better growth rate when compared to its peers. The company’s strategy of low margin and high volume has certainly helped increase its revenue in the last two years. The company is also pursuing its strategy of diversifying its revenue streams through global expansion and investments in new platforms. It has invested in developing the SMAC stack (Social, Mobile, Analytics and Cloud).
With strong guidance for fiscal year 2013, the company is on track to beat its peers this year. The US immigration bill is expected to hit Cognizant Technology Solutions Corp (NASDAQ:CTSH) less than its peers. This is because most of its employee are in the U.S. compared to its peers, which have dominantly an offshore workforce.
| Company | P/S ratio | Op. Margin | 1 yr. Fwd. P/E |
|---|---|---|---|
| Accenture | 1.66 | 14.12% | 16.29 |
| Infosys | 3.13 | 25.97% | 13.49 |
| Cognizant | 2.55 | 18.41% | 14.00 |
Accenture Plc (NYSE:ACN)’s price to sales ratio is low when compared to its peers. This indicates that its stock is undervalued. The company is trading at a relatively higher PE than its peers, but I believe it deserves this premium given the high end nature of its services and good growth prospects. Its operating margin is lower than its Indian peers. However, its operating margins will not be negatively impacted by the proposed immigration bill, a headwind which its Indian peers will face.
Conclusion
Accenture Plc (NYSE:ACN)’s stock price has seen a correction after its last quarter results. I believe this correction provides a good opportunity to go long on the stock. The demand for offshore services in banking and capital markets is increasing, which will help Accenture improve its operating margin. The advent in cloud computing technology and analytics technology will have a positive impact on the growth of the company. The company is also going to benefit from the U.S. immigration bill. So I am bullish on Accenture Plc (NYSE:ACN).
The article Is This IT Company’s Recent Pullback a Buying Opportunity? originally appeared on Fool.com and is written by Ash Sharma.
Ash Sharma has no position in any stocks mentioned. The Motley Fool recommends Accenture. Ash is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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