IoT
News
News
11/17/2006
09:35 AM
50%
50%
RELATED EVENTS
Risk Data as a Strategy
Apr 06, 2016
There is a renewed focus on risk data aggregation and reporting (RDAR) solutions, as financial ins ...Read More>>

Morningstar: EDS, CSC, Accenture Are Best IT Services Investments

But don't sink your dollars into ACS, BearingPoint, or Perot Systems, the firm warns in a report released Friday.

Thinking about investing in the IT services industry? Financial analysis firm Morningstar says consider CSC, Accenture, or EDS. But don't sink your dollars into ACS, BearingPoint, or Perot Systems, the firm warns in a report released Friday.

Morningstar likes Accenture because it's been aggressively building out operations in India, where skilled programmers cost about one-third of the going rate in the U.S. Accenture "was far ahead of the competition" in building up offshore resources, says Morningstar analyst Mike Ford-Taggart. Accenture has about 19,000 Indian employees. Its share price is up about 20% in the past six months. It currently trades with a trailing twelve month price/equity ratio of 22.01.

Morningstar says Computer Sciences Corp. is worth a close look because its strong presence in sensitive federal government and defense markets shields it from low-priced offshore competitors who aren't eligible for much of the work CSC performs. "The board has also authorized a massive share buyback program," says Ford-Taggart. CSC's share price is down about 9% in the past six months. P/E ratio is 21.87.

As for EDS, Morningstar says the problems that plagued the company in the early part of the decade -- including delays in its massive outsourcing contract with the Navy and Marine Corp., and management turnover -- are largely behind it. Morningstar also likes the fact that EDS has purchased a majority stake in Indian BPO provider Mphasis. "A share buyback plan is also in place," notes Ford-Taggart. EDS's share price is up about 6% in the past six months, and P/E ratio is 39.62.

Morningstar cautions that the IT services industry isn't without its dogs, at least from an investment point of view. Failure to file timely financial reports and questions about stock options probes make BearingPoint and ACS, respectively, risky investments, says Morningstar. And Perot Systems is frequently troubled by underperforming contracts. "The firm seemingly cannot hit on all cylinders at once," says Ford-Taggart.

Morningstar's report did not include IBM, the world's largest IT services provider, as the study was limited to pure play vendors. It also did not include offshore providers.

Comment  | 
Print  | 
More Insights
Comments
Newest First  |  Oldest First  |  Threaded View
Register for InformationWeek Newsletters
White Papers
Current Issue
2016 InformationWeek Elite 100
Our 28th annual ranking of the leading US users of business technology.
Video
Slideshows
Twitter Feed
InformationWeek Radio
Archived InformationWeek Radio
Join us for a roundup of the top stories on InformationWeek.com for the week of April 24, 2016. We'll be talking with the InformationWeek.com editors and correspondents who brought you the top stories of the week!
Sponsored Live Streaming Video
Everything You've Been Told About Mobility Is Wrong
Attend this video symposium with Sean Wisdom, Global Director of Mobility Solutions, and learn about how you can harness powerful new products to mobilize your business potential.