Accenture PLC Valuation – April 2018 $ACN

Company Profile (excerpt from Reuters): Accenture plc, incorporated on June 10, 2009, is a professional services company serving clients in a range of industries and in geographic regions, which include North America, Europe and Growth Markets. The Company is engaged in providing management and technology consulting services. The Company’s segments include Communications, Media & Technology; Financial Services; Health & Public Service; Products, and Resources. Its services and solutions include Accenture Strategy, Accenture Consulting, Accenture Digital, Accenture Technology and Accenture Operations. The Accenture Strategy provides a range of strategy services focused on areas, such as digital technologies; enterprise architecture and applications; Chief Financial Officer (CFO) and enterprise value; information technology (IT); security; mergers and acquisitions; operations; advanced customer services, and talent and organization. The Accenture Consulting provides industry insights and management and technology consulting capabilities. The Accenture Digital provides digital services across three areas, including Accenture Interactive, Accenture Mobility and Accenture Analytics. The Accenture Technology comprises two primary areas: Technology Services, and Technology Innovation and Ecosystem. The Accenture Operations provide business process services, infrastructure services, security services and cloud services, including the Accenture cloud platform. The Company also provides intelligent automation services.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of ACN – April 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $97,376,271,429 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.31 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 115.19% Pass
6. Moderate PEmg Ratio PEmg < 20 26.09 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 10.26 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.31 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.01 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass


Stage 2: Determination of Intrinsic Value

EPSmg $5.80
MG Growth Estimate 5.63%
MG Value $114.73
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $84.15
MG Value based on 0% Growth $49.33
Market Implied Growth Rate 8.80%
Current Price $151.42
% of Intrinsic Value 131.98%

Accenture Plc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor is only concerned with the low current ratio. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $4.22 in 2014 to an estimated $5.8 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 8.8% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Accenture Plc revealed the company was trading above its Graham Number of $44.94. The company pays a dividend of $2.42 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 26.09, which was below the industry average of 32.93, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-1.78.

Accenture Plc receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$1.78
Graham Number $44.94
PEmg 26.09
Current Ratio 1.31
PB Ratio 10.26
Current Dividend $2.42
Dividend Yield 1.60%
Number of Consecutive Years of Dividend Growth 6

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Most Recent Balance Sheet Figures

Balance Sheet Information 2/1/2018
Total Current Assets $12,284,948,000
Total Current Liabilities $9,367,912,000
Long-Term Debt $25,923,000
Total Assets $23,132,979,000
Intangible Assets $6,015,022,000
Total Liabilities $13,450,292,000
Shares Outstanding (Diluted Average) 656,119,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.38
Aug2017 $5.44
Aug2016 $6.45
Aug2015 $4.76
Aug2014 $4.52
Aug2013 $4.93
Aug2012 $3.84
Aug2011 $3.39
Aug2010 $2.66
Aug2009 $2.44
Aug2008 $2.65
Aug2007 $1.97
Aug2006 $1.59
Aug2005 $1.56
Aug2004 $1.22
Aug2003 $1.05
Aug2002 $0.56
Aug2001 $1.13

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.80
Aug2017 $5.42
Aug2016 $5.24
Aug2015 $4.52
Aug2014 $4.22
Aug2013 $3.86
Aug2012 $3.22
Aug2011 $2.81
Aug2010 $2.44
Aug2009 $2.23
Aug2008 $2.02
Aug2007 $1.63
Aug2006 $1.37
Aug2005 $1.21
Aug2004 $0.95
Aug2003 $0.73
Aug2002 $0.49

Recommended Reading:

Other ModernGraham posts about the company

9 Best Stocks for Value Investors This Week – 12/17/16
Accenture PLC Valuation – December 2016 $ACN
5 Best Undervalued Stocks of the Week – 8/14/16
Accenture PLC Valuation – August 2016 $ACN
26 Best Stocks For Value Investors This Week – 2/6/16

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The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.






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