Accenture To Buy LabAnswer, Expand Life Sciences Portfolio

Continuing with its strategy of growing through acquisitions, Accenture Plc (NYSE:ACN) recently announced that it has entered into an agreement to acquire LabAnswer, a research and laboratory informatics technology consulting firm. However, financial details of the transaction were kept under wraps.

Rationale Behind the Acquisition

Headquartered in Sugar Land, TX, LabAnswer is specialized in providing informatics consultancy services to scientific and research laboratories. With approximately 250 employees, apart from life sciences, the company offers its services to various other industries, including chemicals, resources, energy, consumer goods, and government.

Upon successful completion of the buyout, the company intends to establish a new business division – Accenture Scientific Informatics Services.

Accenture is planning to leverage its digital technologies such as artificial intelligence, automation, analytics and cloud, with a fundamental redesign of the scientific user experience. With this, the company’s new division will be able to help life sciences companies in better capturing, managing, integrating and analyzing complex research data, thereby giving them better ideas to identify new and more effective treatments for patients.

We believe that this acquisition will enhance Accenture’s portfolio of life sciences services. The acquisition of LabAnswer will not only bring in a huge talent pool, but will also expand its reach in different markets.

Acquisitions – A Key Growth Strategy

Accenture pursues strategic acquisitions to diversify its offerings and expand operating markets. Last year, the company completed or signed about 12 acquisition deals across various business segments, including IT security, CRM capabilities and strategy consulting. In 2015, it closed 21 takeovers.

These acquisitions have enabled Accenture to foray into newer markets, diversify and broaden its product portfolio, as well as maintain the leading position. A strong cash balance of $3.24 billion and an operating cash flow of $1.24 billion at the end of second-quarter fiscal 2017 are expected to support Accenture’s inorganic growth strategy.

Accenture PLC Price

Accenture PLC Price | Accenture PLC Quote

Bottom Line

Accenture’s long-term prospects look promising due to its sustained focus on innovative product launches, continuous investments in enhancing digital and marketing capabilities, as well as major acquisitions. Moreover, we believe that regular acquisitions will significantly contribute to the company's revenue stream.

Nonetheless, Accenture’s recent announcement of creating 15K new jobs by 2020 and investment plan of $1.4 billion for employee training and opening of 10 innovation centers across the U.S. cities may dent its bottom-line results, in our opinion. Furthermore, increasing competition from the likes of DXC Technology Company (NYSE:DXC) and Cognizant Technology Solutions Corporation (NASDAQ:CTSH) , and an uncertain macroeconomic environment may deter the company’s growth to some extent.

Accenture currently carries a Zacks Rank #4 (Sell).

A better-ranked stock worth considering in the consulting industry is NV5 Global Inc. (NASDAQ:NVEE) , which carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The long-term expected earnings per share growth rate for NV5 Global is 20%.

Will You Make a Fortune on the Shift to Electric Cars?

Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

It's not the one you think.

See This Ticker Free >>