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Discussion for current, future, past employees of Accenture. No client discussion. Are you in Accenture Philippines? Check out /r/Accenture_PH for native language or location specific posts.
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The ESSEC and Accenture Strategic Business Analytics Chair was created to develop a better understanding of the impact digital has on the market and individual business as well as governments and day-to-day life, and to train the Digital Architects of tomorrow.
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Posted by3 months ago
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Posted by4 months ago

Hello! This week I will take the opportunity to value Accenture. Over the past decade, they have achieved impressive returns with a compounded annual growth rate (CAGR) of 15.74%. This overperformed the S&P500, which had a return of 10.16%, and outperformed the VT, which had a return of 8.18%.

Total Returns against markets: https://imgur.com/a/L8aSfDg

The company's growth is attributed to increased revenues, which increased by 11.49% CAGR in the last 5 years, improved operational margins that went from 14% to 15.3% today, and through dividends and share buybacks, which increase their return on investment and increasing multiples.


Revenue CAGR L5YEPS CAGR L5YDividends CAGR L5Y
11.49%14.62%10.48%
Company Description:

Accenture plc operates as a consulting and outsourcing company. The company works for a lot of different companies in different industries all over the world. The type of work that the company does is consulting and outsourcing, with 55% of revenue coming from consulting and 45% from outsourcing.


Industry Groups Share of RevenueAverage 2018 - 2022
Communications, Media & Tech19%
Financial Services20%
Health & Public Service18%
Products29%
Resources14%


Industry Groups GrowthAverage 2018 - 2022
Communications, Media & Tech13%
Financial Services9%
Health & Public Service13%
Products12%
Resources8%
Total11%


Valuation (Discounted Cash Flow):

Revenue growth rate for the next 5 years will be 7.5%, decreasing slowly from year 6 to 10 to the risk-free rate (3.91%).

Operating Margin: The operating margin is forecasted to increase from 15.27% in 2022 to 16% in 2027.

Cost of Capital: The company's cost of capital stands at 9.70%, with 98.44% of it being equity with a cost of 9.79%, and 1.56% being debt with a cost of debt of 4.15%.

Terminal Growth Rate: The terminal growth rate is anticipated to be the risk-free rate of 3.91%.

Terminal Cost of Capital: The terminal cost of capital is calculated as the risk-free rate plus 4.5%, equating to 8.41%.

Terminal Return on Invested Capital: The terminal return on invested capital is expected to be more than 5% higher than the cost of capital, as the company has shown that it can return a high return on invested capital (34.51% in 2022), so it will be 13.41%.

Value per Share: The value per share is estimated to be $239.08.

Market Price Today: The current market price of the company is $270.00.

Based on the above calculations, the company is overvalued. I would consider a good opportunity to buy some Accenture plc around $230. This company has had remarkable growth in the last 10 years, and I consider it a high-quality company as it is growing, unleveraged, profitable, and returns capital to shareholders through dividends and buybacks.

Risks:

Macroeconomy:

• Accenture's business is dependent on the health of the global economy and market conditions. Economic downturns, geopolitical instability, or other market disruptions could impact the demand for the company's services and its ability to generate revenue.

Dependence on key clients:

• Accenture generates a significant portion of its revenue from a small number of large clients. Dependence on key clients could increase the company's vulnerability to client-specific risks such as economic downturns or client insolvency.

TLDR

According to my discounted cash flow model analysis, the market price of Accenture plc is overvalued. The company has a track record of growth and operates in an industry that may face challenges in the short term but will remain in a strong position and as such is an attractive company at a right price. I consider this company high quality and as such I don’t expect a big margin of safety so around $230 I will be happy to own.

However, there are several risks to consider, including the economy and the high dependence on key clients. Despite these challenges, Accenture remains in a good position in the industry and in the market to provide good returns for investors.

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Posted by7 months ago
11
27 comments
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Posted by8 months ago
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15 comments