Accenture PLC (ACN, Financial) experienced a slight daily decline of -0.18%, yet it has gained 3.42% over the past three months. With an Earnings Per Share (EPS) of 10.77, investors may wonder if the stock is fairly valued. This article delves into a comprehensive valuation analysis of Accenture PLC (ACN), aiming to answer this pivotal question for value investors and potential GuruFocus.com members.
Company Introduction
Accenture PLC is a global leader in IT services, offering a broad spectrum of consulting, strategy, and operational services across various sectors. With nearly 500,000 employees spread across 200 cities in 51 countries, Accenture PLC is at the forefront of driving digital transformation and innovation. A critical aspect of understanding Accenture PLC's valuation is comparing its current stock price of $335.83 with the GF Value, an estimate of its fair value, which stands at $359.84.
Summarize GF Value
The GF Value is a unique calculation that reflects the intrinsic value of a stock. It is derived from historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line suggests the fair trading value for the stock. When the stock price aligns closely with the GF Value Line, it indicates that the stock is fairly valued, as is the case with Accenture PLC (ACN, Financial) at its current price. This alignment suggests that the long-term return of Accenture PLC's stock should be in line with the company's business growth rate.
Financial Strength
Investing in companies with robust financial strength can safeguard against the risk of capital loss. Accenture PLC's financial strength is impressive, with a cash-to-debt ratio of 2.87, ranking it higher than over half of its peers in the Software industry. This financial fortitude is further underscored by GuruFocus, which gives Accenture PLC a high financial strength rating of 9 out of 10.
Profitability and Growth
Profitable companies are generally less risky investments, and Accenture PLC's consistent profitability over the past decade is a testament to its solid performance. With annual revenues of $64.10 billion and an operating margin surpassing 80% of its industry competitors, the company's profitability is robust. Additionally, Accenture PLC's growth is notable, with an average annual revenue increase of 13.6%, ranking favorably within the Software industry.
ROIC vs WACC
Comparing Return on Invested Capital (ROIC) with the Weighted Average Cost of Capital (WACC) is another method to gauge a company's profitability. Accenture PLC's ROIC of 20.97 is significantly higher than its WACC of 11.1, indicating that it is creating value for shareholders. This relationship between ROIC and WACC highlights the company's efficient capital allocation and value generation.
Conclusion
In conclusion, Accenture PLC (ACN, Financial) appears to be fairly valued, considering its strong financial condition, impressive profitability, and solid growth prospects. The company's performance is competitive within the Software industry, and its stock valuation closely mirrors its business growth. For a deeper understanding of Accenture PLC's financials, interested investors can explore its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
