Innovations in artificial intelligence (AI) and the Internet of Things (IoT) have motivated several organizations to spend significantly on their digital transformation over the past couple of years to make their operations more efficient. The COVID-19 pandemic accelerated this trend as organizations relied increasingly on digital solutions to stay afloat. With COVID-19 cases rising again, the pace of digital transformation is not expected to slow anytime soon.

According to a Research and Markets report, the global digital transformation market is expected to reach $1.56 trillion in 2028, growing at a 16.1% CAGR. Furthermore, investors’ interest in digital transformation stocks is evident in the VanEck Vectors ETF Trust – VanEck Vectors Digital Transformation ETF’s (DAPP) 5.4% returns over the past six months.

So, we think it could be wise to bet on fundamentally sound digital transformation stocks Accenture plc (ACN - Get Rating) and Cognizant Technology Solutions Corporation (CTSH - Get Rating).

Accenture plc (ACN - Get Rating)

Based in Dublin, Ireland, ACN is a professional services company that provides  strategy and consultation, interactive, and technology and operations services worldwide. The company also offers several application services.

On November 18,ACN acquired BRIDGEi2i, an artificial intelligence (AI) and analytics firm headquartered in Bengaluru, India. The acquisition is expected to enhance the company’s operations, especially in the analytics domain.

For its fiscal fourth quarter, ended August 31, 2021, ACN’s revenues increased 23.8% year-over-year to $13.42 billion. Its operating income came in at $1.96 billion, up 26.8% year-over-year. Its net income increased 10.1% year-over-year to $1.44 billion. And its EPS increased 10.6% year-over-year to $2.20.

ACN’s revenue is expected to be  $50.98 billion in its fiscal year 2022, representing a 13.8% year-over-year rise. The company’s EPS is expected to increase 15.6% year-over-year to $9.02 in the current year. It surpassed the Street’s EPS estimates in each of the trailing four quarters, and the stock has gained 39.9% in price year-to-date.

It is no surprise that ACN has an overall B rating, which equates to a Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.

In addition, it has a B grade for Stability and Quality. ACN is ranked #4  of 11 stocks in the Outsourcing – Tech Services industry. Click here to see the additional POWR Ratings for ACN (Growth, Value, Momentum, and Sentiment).

Cognizant Technology Solutions Corporation (CTSH - Get Rating)

CTSH, a Teaneck, N.J.-based professional services company, provides consulting and technology, and outsourcing services in several countries. The company operates through four segments: Financial Services; Healthcare; Products and Resources; and Communications-Media, and Technology. 

On October 19,  CTSH announced its aim to achieve net-zero emissions by 2030 as part of its ongoing environmental, social, and governance (ESG) plan to become a more sustainable business. Brian Humphries, the company’s CEO, said, “Climate change is widespread, rapid and intensifying. As a global company, we take seriously our responsibility to leverage our expertise and resources to help address climate change. I am proud to announce that Cognizant commits to achieve net zero emissions by 2030.”

CTSH’s revenues increased 11.8% year-over-year to $4.74 billion for the third quarter, ended September 30, 2021. The company’s income from operations came in at $729 million, up 20.9% year-over-year. Its net income was  $544 million, up 56.3% year-over-year. And its EPS came in at $1.03, up 60.9% year-over-year.

Analysts expect CTSH’s revenue to be $18.51 billion in its fiscal year 2021, representing an 11.2% year-over-year rise. The company’s EPS is expected to increase 18.4% year-over-year to $4.05 in the current year. It surpassed the Street’s EPS estimates in three of the trailing four quarters. Over the past six months, the stock has gained 11.4% in price.

CTSH’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which indicates a Buy in our proprietary rating system.

CTSH has a B grade for Stability and Quality. It is ranked #3 in the Outsourcing – Tech Services industry. Click here to see the additional POWR Ratings for Growth, Value, Momentum, and Sentiment for CTSH.

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