Accenture PLC (ACN, Financial) has recently experienced a daily loss of 4.94% and a three-month loss of 0.9%. Despite these losses, the company's Earnings Per Share (EPS) stands at 11.22. This analysis aims to determine if Accenture PLC (ACN) is modestly undervalued or priced right. The subsequent valuation analysis provides a comprehensive overview of the company's financials and intrinsic value.
A Glimpse into Accenture PLC
Accenture PLC is a global IT-services giant that offers consulting, strategy, and technology and operational services. The company's services range from assisting enterprises with digital transformation to procurement services to software system integration. Accenture PLC serves various sectors, including communications, media and technology, financial services, health and public services, consumer products, and resources. The company boasts nearly 500,000 employees across 200 cities in 51 countries.
Accenture PLC's stock price is currently $298.84, while its estimated fair value (GF Value) is $349.58. This comparison between the stock price and the GF Value sets the stage for a deeper exploration of the company's value.
Understanding GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated based on historical multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line provides a visual representation of the stock's fair trading value. If the stock price is significantly above the GF Value Line, the stock may be overvalued, and its future returns may be poor. Conversely, if the stock price is significantly below the GF Value Line, the stock may be undervalued, and its future returns are likely to be higher.
Based on this valuation method, Accenture PLC appears to be modestly undervalued. This suggests that the long-term return of Accenture PLC's stock is likely to be higher than its business growth.
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Accenture PLC's Financial Strength
Before investing in a company, it is crucial to assess its financial strength. Companies with poor financial strength pose a higher risk of permanent loss. Accenture PLC has a cash-to-debt ratio of 2.76, better than 51.24% of companies in the Software industry. The overall financial strength of Accenture PLC is 9 out of 10, indicating strong financial health.
Profitability and Growth of Accenture PLC
Accenture PLC's profitability is a key factor to consider. The company has been profitable for 10 out of the past 10 years. Over the past twelve months, the company had a revenue of $63.60 billion and Earnings Per Share (EPS) of $11.22. Its operating margin is 14.42%, which ranks better than 81.11% of companies in the Software industry. Overall, the profitability of Accenture PLC is ranked 9 out of 10, indicating strong profitability.
Furthermore, growth is a critical factor in company valuation. Accenture PLC's 3-year average annual revenue growth is 13%, ranking better than 61.52% of companies in the Software industry. The 3-year average EBITDA growth rate is 16.9%, which ranks better than 63.48% of companies in the Software industry.
ROIC Vs. WACC
A comparison of the company's return on invested capital (ROIC) to the weighted average cost of capital (WACC) can also determine profitability. ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, Accenture PLC's ROIC is 22.46, and its WACC is 10.95.
Conclusion
Overall, Accenture PLC's stock appears to be modestly undervalued. The company's strong financial condition, profitability, and growth prospects make it an appealing investment. To learn more about Accenture PLC's stock, you can check out its 30-Year Financials here.
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