Accenture PLC (ACN, Financial) recently reported a slight daily decrease of 0.26%, yet it has experienced a 3-month gain of 8.71%. With an Earnings Per Share (EPS) of $10.77, investors are keen to understand whether the stock is fairly valued. This article will delve into the valuation analysis of Accenture PLC (ACN), providing insights into whether its current market price reflects its intrinsic value.
Company Overview
Accenture PLC is a global leader in IT services, offering a broad spectrum of consulting, strategy, technology, and operational services. The firm's expertise spans digital transformation, procurement services, and software system integration, catering to sectors such as communications, media, technology, financial services, health, public services, consumer products, and resources. Employing nearly 500,000 people across 200 cities in 51 countries, Accenture PLC boasts a significant footprint in the IT industry. With a current stock price of $342.73 and a GF Value of $351.16, we will explore how the stock measures up against its estimated fair value.
Understanding GF Value
The GF Value is a unique measure that estimates the intrinsic value of a stock. It incorporates historical trading multiples such as PE, PS, PB ratios, and Price-to-Free-Cash-Flow, an adjustment factor based on the company's past performance and growth, and projections of future business performance. When a stock trades significantly above the GF Value Line, it may be overvalued, and conversely, if it trades below, it could be undervalued. Currently, Accenture PLC (ACN, Financial) appears to be fairly valued according to our GF Value estimate, suggesting that the stock price aligns closely with its intrinsic value.
As Accenture PLC is fairly valued, the long-term return of its stock is likely to mirror the rate of its business growth.
Financial Strength
Investors must consider a company's financial strength to mitigate the risk of permanent capital loss. Metrics such as the cash-to-debt ratio and interest coverage can provide insight into financial health. Accenture PLC has a cash-to-debt ratio of 2.87, ranking above 53.04% of companies in the Software industry, with an overall financial strength rating of 9 out of 10, indicating robust financial stability.
Profitability and Growth
Investing in profitable companies, especially those with consistent long-term profitability, generally presents lower risk. Accenture PLC has maintained profitability for the past decade, with a revenue of $64.10 billion and an Earnings Per Share (EPS) of $10.77 over the past twelve months. The company's operating margin of 13.74% outperforms 80.3% of its industry peers. In terms of growth, Accenture PLC's average annual revenue growth rate is 13.6%, ranking favorably among its industry counterparts. Its three-year average EBITDA growth rate is 10.7%, which is also competitive within the Software industry.
ROIC vs. WACC
Evaluating a company's profitability can also be done by comparing its Return on Invested Capital (ROIC) against its Weighted Average Cost of Capital (WACC). A company that achieves a higher ROIC than its WACC is typically creating value for its shareholders. Accenture PLC's ROIC over the past 12 months stands at 20.97, exceeding its WACC of 11.28, indicating effective capital allocation and value creation.
Conclusion
In conclusion, Accenture PLC (ACN, Financial) is fairly valued, reflecting a strong financial condition and robust profitability. Its growth outperforms more than half of the companies in the Software industry. For a detailed look at Accenture PLC's financials, investors can view 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.
