As a recovering part-time musician, I know a lot about the disconnect between the analog and digital worlds. A whole collection of songs that I originally recorded on analog media are now basically stuck that way.
You see, I still have dozens of reel-to-reel tapes of the early songs I wrote in the late ’80s to the early 2000s, and to go “fully digital,” I would have to hire a sound engineer whose an expert on digitizing these files.
Many thousands of firms throughout the global economy are facing a problem very similar to this one. See, as crazy as it sounds, there are lots of companies out there who have not made a full digital transformation, and drastically need help in order to do so.
All of this explains why IDC says spending on this field of IT services will hit $6.8 trillion between the base year of 2020 and 2023.
And I’ve identified a leader in the field that is set to double its earnings in roughly 2.5 years…
The Digitization Struggle
Now then, the reason the digital transformation for businesses is so lucrative has a lot to do with human nature. Simply stated, most of us will put off a difficult task as long as possible.
So it goes with many companies that still have paper-based records. They also have aging databases and other files that reside in older, analog systems.
The sheer volume of work converting all that data and applications into digital formats that reside in the cloud is an overwhelming prospect beyond the reach of even the most seasoned of tech executives.
No wonder IDC says the field of digital transformation is growing at a yearly compound rate of 15%, meaning it will double in value in less than four years.
That’s why you need to know about Perficient Inc. (PRFT). This firm is a digital consultancy company that more properly sees itself as a digital change agent.
It’s device-agnostic and integrates a wide range of tech platforms depending on the client’s needs. The idea is to help simplify operations and improve profit margins for its customers and give it bullet-proof platforms.
So, it provides customers with automated ordering systems, mobile-centric user outreach, e-commerce backends, and digital marketing programs, just to name a few.
To see how good the firm investment case is, let’s run it through my five rules for building tech wealth. Take a look:
Tech Wealth Rule No. 1: Great Companies Have Great Operations.
These are well-run firms with top-notch leaders.
The firm has an interesting blend of sectors covering digital IT services for automotive, finance, manufacturing, and retail. It’s particularly well known and highly regarded for its work in the life sciences.
Named the sixth largest healthcare IT consulting firm by Modern Healthcare in 2020, Perficient supports nine of the 10 largest healthcare providers and the five largest health insurance plans.
It also boasts an impressive roster of strategic partners, a sign the firm is great at what it does. Partners include Adobe Inc. (ADBE), Amazon Web Services, Oracle Corp. (ORCL), and International Business Machines Inc. (IBM).
Tech Wealth Rule No. 2: Separate the Signal from the Noise.
To create real wealth, you have to ignore not just the hype from the company but the noise you often hear on Wall Street.
If you just looked at the headlines, you would naturally assume that Big Tech is carrying the day. The mega-cap leaders get lots of buzz because their market values now total several trillion dollars.
And yet, most folks have never heard of Perficient. Irony abounds.
Had you bought Perficient at the beginning of this year, you would have crushed the S&P 500 by a stunning 768%. Just think what’ll happen once Wall Street wakes up to the great story here.
In fact, this same logic can apply to other areas of tech as well. Facebook is trying so hard to associate their name with the concept of the metaverse that they decided to take the reverse approach and change their name to “Meta.”
But even though the metaverse does indeed have massive potential, Facebook isn’t the way to play it. Instead, I have two companies and one cryptocurrency in mind, and each one could see 1,000% gains in the next few years. But more on that right here.
Tech Wealth Rule No. 3: Ride the Unstoppable Trends.
Look for stocks in red-hot sectors because they offer the best chance for life-changing gains.
Perficient clearly meets this mandate. During Covid, firms across the board stepped up their efforts to go digital in every realm possible.
That’s bound to continue with the rise of hybrid work schedules where large swaths of workers switch off between working at the office and telecommuting because employees need remote access to key apps and data.
Tech Wealth Rule No. 4: Focus on Growth.
Companies that have the strongest growth rates almost always offer the highest stock returns.
As I noted a moment ago, the market for digital-savvy IT services firms is huge. It’s projected to grow annually by more than 15%.
That means the overall market where the firms have the pole position will double to $13.6 trillion by the end of 2028. If Perficient just matches the sector’s growth, sales also will double over the same period.
I believe it’s important to note that the firm is growing earnings faster than sales. That means we have an efficient firm that is throwing off a lot of profits.
Tech Wealth Rule No. 5: Target Stocks That Can Double Your Money
This is where we look at the firm’s earnings growth and see how long it will take to double profits. By doing that we can figure out how long on average it should take for the stock to roughly double.
Over the last three years, Perficient has boasted high-profit growth that sets up an interesting comparison to mega-cap Microsoft Corp. (MSFT), which is a strategic partner. Both have grown their per-share profits over the last three years by 27%.
But Perficient trades at half the price of Microsoft, which I think bodes well for the former’s price appreciation.
For the September quarter, per-share profits grew about 10% more than their three-year average of 27%. With that in mind, I’m going to forecast future profits at the lower rate.
Now we use what I call my doubling calculator. Mathematicians call it the Rule of 72. Let’s divide the compound growth rate of 27 into the number 72.
We find that it should take just a tad more than 2.5 years for the firm to see earnings double. Considering that earnings so often follow stock price, that gives us 100% gains.
As you can see, I believe this stock will continue to outperform the market for many years as it ramps up your net worth.
Cheers and good investing,