This Simple Trade Could Lead To 15% Gains In 6 Months

When a company reports earnings per share (EPS) that miss analysts’ estimates, it’s usually not read by Wall Street as a “buy” signal. However, when that company also reports better-than-expected revenue of $7.78 billion in the period, it definitely warrants your attention.

#-ad_banner-#That’s precisely what happened to consulting and outsourcing firm Accenture plc (NYSE: ACN). On Wednesday, the Dublin-based company reported fiscal fourth-quarter numbers that were mixed, with the aforementioned revenue up 10% year over year, coming in well ahead of top-line forecasts for $7.62 billion. 

The bottom line, however, is where Accenture came up short, with the company reporting adjusted EPS of $1.08. That metric was up 7% from the same quarter a year ago, but it didn’t quite meet analyst expectations for EPS of $1.10. For the full year, it was much the same for Accenture. The company showed a 5% increase in revenue for fiscal 2014 to $30 billion, firmly above estimates for revenue of $29.8 billion. As for the bottom line, the final EPS for the year was $4.52, an 8% jump from the prior year, but a penny below forecasts. 

For ACN shares, the mixed earnings come at a time when the shares are at an inflection point. In 2013, the shares saw a big run higher of nearly 24%. Yet so far this year, shares are in the red, albeit by only 2%. Despite strong revenue and solid earnings showings over the past several quarters, the stock has been caught up in a battle between bulls and bears. 

The chart here of ACN shows the volatility in the stock since the beginning of the year. Shares have bounced below and back above the 50-day moving average some 15 times, and below and back above the 200-day moving average seven times. Shares now trade slightly below the short-term and long-term support lines.

So, with the stock now slightly below its two key trend lines, why do I think we’re looking at a screaming “buy” right here?

The answer has a lot to do with one key factor — growth.

During fiscal Q4, Accenture managed to demonstrate very strong growth in four key areas. Its consultancy operations jumped 15% year over year, while there was a 14% leap in the company’s communications, media and technology operating group, as well as a 14% rise in its products division. The financial services division saw a solid 10% revenue increase. 

If Accenture can continue growing at its current rates, then I suspect that the bottom line will fall into step with the top line. Stated differently, the company will start besting estimates on both revenue and earnings, and that should give this consulting firm’s shares a strong tailwind over the next two quarters.

For traders looking to establish a position in a strong company that’s trading at attractive levels, ACN is a stock you need to check out right now.

Recommended Trade Setup: 

— Buy ACN at the market 
— Set initial stop-loss at $72.74
— Set initial price target at $90.86 for an approximate 15% gain in six months

This article originally appeared on ProfitableTrading.com: This Stock Just Missed Estimates, But It’s Still a Screaming ‘Buy’