Intrinsic value of Accenture Cl A - ACN

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$122.74

  Intrinsic Value

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  Value-price divergence*

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$122.74

 
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*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of ACN stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 79.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  5.72
  6.40
  6.26
  6.13
  6.02
  5.92
  5.83
  5.74
  5.67
  5.60
  5.54
  5.49
  5.44
  5.40
  5.36
  5.32
  5.29
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
  5.07
Revenue, $m
  34,798
  37,025
  39,343
  41,756
  44,270
  46,890
  49,622
  52,473
  55,448
  58,554
  61,800
  65,191
  68,737
  72,446
  76,326
  80,387
  84,638
  89,089
  93,752
  98,636
  103,755
  109,119
  114,742
  120,637
  126,819
  133,301
  140,100
  147,232
  154,714
  162,563
  170,798
Variable operating expenses, $m
 
  12,936
  13,723
  14,542
  15,396
  16,286
  17,214
  18,182
  19,193
  20,248
  21,350
  22,141
  23,345
  24,605
  25,922
  27,302
  28,745
  30,257
  31,841
  33,500
  35,238
  37,060
  38,970
  40,972
  43,071
  45,273
  47,582
  50,004
  52,545
  55,211
  58,008
Fixed operating expenses, $m
 
  17,825
  18,270
  18,727
  19,195
  19,675
  20,167
  20,671
  21,188
  21,718
  22,261
  22,817
  23,388
  23,972
  24,572
  25,186
  25,816
  26,461
  27,122
  27,801
  28,496
  29,208
  29,938
  30,687
  31,454
  32,240
  33,046
  33,872
  34,719
  35,587
  36,477
Total operating expenses, $m
  29,138
  30,761
  31,993
  33,269
  34,591
  35,961
  37,381
  38,853
  40,381
  41,966
  43,611
  44,958
  46,733
  48,577
  50,494
  52,488
  54,561
  56,718
  58,963
  61,301
  63,734
  66,268
  68,908
  71,659
  74,525
  77,513
  80,628
  83,876
  87,264
  90,798
  94,485
Operating income, $m
  5,659
  6,265
  7,350
  8,487
  9,678
  10,929
  12,241
  13,619
  15,067
  16,589
  18,189
  20,233
  22,004
  23,869
  25,832
  27,899
  30,077
  32,371
  34,788
  37,336
  40,021
  42,851
  45,834
  48,979
  52,294
  55,788
  59,472
  63,356
  67,449
  71,765
  76,313
EBITDA, $m
  6,388
  6,739
  7,832
  8,976
  10,176
  11,434
  12,755
  14,142
  15,599
  17,130
  18,740
  20,434
  22,216
  24,092
  26,067
  28,146
  30,337
  32,645
  35,077
  37,640
  40,340
  43,187
  46,187
  49,350
  52,684
  56,198
  59,903
  63,809
  67,925
  72,265
  76,839
Interest expense (income), $m
  16
  14
  508
  1,024
  1,561
  2,120
  2,702
  3,310
  3,944
  4,605
  5,296
  6,018
  6,772
  7,560
  8,385
  9,248
  10,151
  11,096
  12,086
  13,123
  14,209
  15,347
  16,540
  17,791
  19,102
  20,476
  21,918
  23,430
  25,016
  26,679
  28,425
Earnings before tax, $m
  5,604
  6,250
  6,841
  7,463
  8,118
  8,809
  9,539
  10,310
  11,124
  11,984
  12,893
  14,216
  15,233
  16,308
  17,447
  18,651
  19,926
  21,275
  22,702
  24,213
  25,812
  27,504
  29,294
  31,188
  33,192
  35,312
  37,554
  39,926
  42,434
  45,085
  47,889
Tax expense, $m
  1,254
  1,688
  1,847
  2,015
  2,192
  2,379
  2,576
  2,784
  3,003
  3,236
  3,481
  3,838
  4,113
  4,403
  4,711
  5,036
  5,380
  5,744
  6,130
  6,538
  6,969
  7,426
  7,909
  8,421
  8,962
  9,534
  10,140
  10,780
  11,457
  12,173
  12,930
Net income, $m
  4,112
  4,563
  4,994
  5,448
  5,926
  6,431
  6,963
  7,526
  8,120
  8,748
  9,412
  10,377
  11,120
  11,905
  12,736
  13,615
  14,546
  15,531
  16,573
  17,675
  18,843
  20,078
  21,385
  22,767
  24,230
  25,778
  27,415
  29,146
  30,977
  32,912
  34,959

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  4,908
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  20,609
  16,708
  17,754
  18,843
  19,977
  21,160
  22,393
  23,679
  25,022
  26,423
  27,888
  29,418
  31,019
  32,692
  34,443
  36,276
  38,194
  40,203
  42,307
  44,511
  46,821
  49,241
  51,779
  54,439
  57,229
  60,154
  63,222
  66,441
  69,817
  73,359
  77,075
Adjusted assets (=assets-cash), $m
  15,701
  16,708
  17,754
  18,843
  19,977
  21,160
  22,393
  23,679
  25,022
  26,423
  27,888
  29,418
  31,019
  32,692
  34,443
  36,276
  38,194
  40,203
  42,307
  44,511
  46,821
  49,241
  51,779
  54,439
  57,229
  60,154
  63,222
  66,441
  69,817
  73,359
  77,075
Revenue / Adjusted assets
  2.216
  2.216
  2.216
  2.216
  2.216
  2.216
  2.216
  2.216
  2.216
  2.216
  2.216
  2.216
  2.216
  2.216
  2.216
  2.216
  2.216
  2.216
  2.216
  2.216
  2.216
  2.216
  2.216
  2.216
  2.216
  2.216
  2.216
  2.216
  2.216
  2.216
  2.216
Average production assets, $m
  1,367
  592
  629
  668
  708
  750
  794
  840
  887
  937
  989
  1,043
  1,100
  1,159
  1,221
  1,286
  1,354
  1,425
  1,500
  1,578
  1,660
  1,746
  1,836
  1,930
  2,029
  2,133
  2,242
  2,356
  2,475
  2,601
  2,733
Working capital, $m
  3,097
  -1,925
  -2,046
  -2,171
  -2,302
  -2,438
  -2,580
  -2,729
  -2,883
  -3,045
  -3,214
  -3,390
  -3,574
  -3,767
  -3,969
  -4,180
  -4,401
  -4,633
  -4,875
  -5,129
  -5,395
  -5,674
  -5,967
  -6,273
  -6,595
  -6,932
  -7,285
  -7,656
  -8,045
  -8,453
  -8,881
Total debt, $m
  27
  857
  1,727
  2,632
  3,574
  4,557
  5,581
  6,650
  7,766
  8,931
  10,148
  11,420
  12,749
  14,140
  15,595
  17,118
  18,712
  20,381
  22,130
  23,962
  25,881
  27,893
  30,001
  32,212
  34,530
  36,961
  39,511
  42,185
  44,991
  47,934
  51,022
Total liabilities, $m
  13,054
  13,884
  14,754
  15,659
  16,601
  17,584
  18,608
  19,677
  20,793
  21,958
  23,175
  24,447
  25,776
  27,167
  28,622
  30,145
  31,739
  33,408
  35,157
  36,989
  38,908
  40,920
  43,028
  45,239
  47,557
  49,988
  52,538
  55,212
  58,018
  60,961
  64,049
Total equity, $m
  7,555
  2,824
  3,000
  3,184
  3,376
  3,576
  3,784
  4,002
  4,229
  4,466
  4,713
  4,972
  5,242
  5,525
  5,821
  6,131
  6,455
  6,794
  7,150
  7,522
  7,913
  8,322
  8,751
  9,200
  9,672
  10,166
  10,685
  11,228
  11,799
  12,398
  13,026
Total liabilities and equity, $m
  20,609
  16,708
  17,754
  18,843
  19,977
  21,160
  22,392
  23,679
  25,022
  26,424
  27,888
  29,419
  31,018
  32,692
  34,443
  36,276
  38,194
  40,202
  42,307
  44,511
  46,821
  49,242
  51,779
  54,439
  57,229
  60,154
  63,223
  66,440
  69,817
  73,359
  77,075
Debt-to-equity ratio
  0.004
  0.300
  0.580
  0.830
  1.060
  1.270
  1.470
  1.660
  1.840
  2.000
  2.150
  2.300
  2.430
  2.560
  2.680
  2.790
  2.900
  3.000
  3.100
  3.190
  3.270
  3.350
  3.430
  3.500
  3.570
  3.640
  3.700
  3.760
  3.810
  3.870
  3.920
Adjusted equity ratio
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169
  0.169

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  4,112
  4,563
  4,994
  5,448
  5,926
  6,431
  6,963
  7,526
  8,120
  8,748
  9,412
  10,377
  11,120
  11,905
  12,736
  13,615
  14,546
  15,531
  16,573
  17,675
  18,843
  20,078
  21,385
  22,767
  24,230
  25,778
  27,415
  29,146
  30,977
  32,912
  34,959
Depreciation, amort., depletion, $m
  729
  475
  482
  489
  497
  505
  514
  522
  532
  541
  551
  201
  211
  223
  235
  247
  260
  274
  288
  303
  319
  336
  353
  371
  390
  410
  431
  453
  476
  500
  526
Funds from operations, $m
  4,150
  5,038
  5,476
  5,937
  6,423
  6,936
  7,477
  8,048
  8,652
  9,289
  9,963
  10,578
  11,331
  12,128
  12,971
  13,863
  14,806
  15,805
  16,861
  17,979
  19,162
  20,413
  21,738
  23,138
  24,620
  26,188
  27,846
  29,599
  31,453
  33,412
  35,484
Change in working capital, $m
  -425
  -116
  -121
  -125
  -131
  -136
  -142
  -148
  -155
  -162
  -169
  -176
  -184
  -193
  -202
  -211
  -221
  -231
  -242
  -254
  -266
  -279
  -292
  -307
  -321
  -337
  -354
  -371
  -389
  -408
  -428
Cash from operations, $m
  4,575
  5,178
  5,597
  6,063
  6,554
  7,072
  7,619
  8,197
  8,806
  9,451
  10,132
  10,754
  11,516
  12,321
  13,173
  14,074
  15,027
  16,036
  17,104
  18,233
  19,428
  20,692
  22,030
  23,445
  24,942
  26,525
  28,199
  29,970
  31,842
  33,821
  35,912
Maintenance CAPEX, $m
  0
  -104
  -114
  -121
  -128
  -136
  -144
  -153
  -161
  -171
  -180
  -190
  -201
  -211
  -223
  -235
  -247
  -260
  -274
  -288
  -303
  -319
  -336
  -353
  -371
  -390
  -410
  -431
  -453
  -476
  -500
New CAPEX, $m
  -497
  -51
  -37
  -39
  -40
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -57
  -59
  -62
  -65
  -68
  -71
  -75
  -78
  -82
  -86
  -90
  -94
  -99
  -104
  -109
  -114
  -120
  -126
  -132
Cash from investing activities, $m
  -610
  -155
  -151
  -160
  -168
  -178
  -188
  -199
  -209
  -221
  -232
  -244
  -258
  -270
  -285
  -300
  -315
  -331
  -349
  -366
  -385
  -405
  -426
  -447
  -470
  -494
  -519
  -545
  -573
  -602
  -632
Free cash flow, $m
  3,965
  5,023
  5,446
  5,903
  6,385
  6,894
  7,431
  7,998
  8,597
  9,230
  9,900
  10,510
  11,258
  12,050
  12,888
  13,774
  14,712
  15,704
  16,755
  17,866
  19,043
  20,287
  21,604
  22,998
  24,472
  26,031
  27,680
  29,425
  31,269
  33,219
  35,280
Issuance/(repayment) of debt, $m
  -1
  833
  869
  905
  943
  983
  1,025
  1,069
  1,116
  1,165
  1,217
  1,272
  1,330
  1,391
  1,455
  1,523
  1,594
  1,669
  1,748
  1,832
  1,919
  2,012
  2,109
  2,211
  2,318
  2,431
  2,550
  2,674
  2,806
  2,943
  3,088
Issuance/(repurchase) of shares, $m
  -2,014
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -1,959
  833
  869
  905
  943
  983
  1,025
  1,069
  1,116
  1,165
  1,217
  1,272
  1,330
  1,391
  1,455
  1,523
  1,594
  1,669
  1,748
  1,832
  1,919
  2,012
  2,109
  2,211
  2,318
  2,431
  2,550
  2,674
  2,806
  2,943
  3,088
Total cash flow (excl. dividends), $m
  1,983
  5,856
  6,315
  6,808
  7,328
  7,877
  8,456
  9,067
  9,713
  10,395
  11,117
  11,782
  12,588
  13,441
  14,343
  15,297
  16,306
  17,374
  18,503
  19,698
  20,962
  22,299
  23,713
  25,208
  26,790
  28,462
  30,230
  32,099
  34,074
  36,162
  38,369
Retained Cash Flow (-), $m
  -1,421
  -174
  -177
  -184
  -192
  -200
  -208
  -217
  -227
  -237
  -247
  -259
  -270
  -283
  -296
  -310
  -324
  -339
  -356
  -373
  -390
  -409
  -429
  -450
  -471
  -494
  -519
  -544
  -571
  -599
  -628
Prev. year cash balance distribution, $m
 
  4,905
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  10,588
  6,138
  6,624
  7,136
  7,677
  8,247
  8,850
  9,486
  10,158
  10,869
  11,523
  12,318
  13,158
  14,047
  14,987
  15,982
  17,034
  18,148
  19,326
  20,572
  21,890
  23,284
  24,759
  26,318
  27,968
  29,711
  31,555
  33,504
  35,564
  37,741
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  10,151
  5,619
  5,765
  5,876
  5,950
  5,985
  5,979
  5,929
  5,836
  5,698
  5,472
  5,256
  5,003
  4,716
  4,400
  4,061
  3,706
  3,342
  2,976
  2,614
  2,264
  1,932
  1,623
  1,340
  1,088
  867
  677
  518
  388
  284
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Accenture plc provides consulting, technology, and outsourcing services worldwide. Its Communications, Media & Technology segment provides professional services that help clients accelerate and deliver digital transformation, and enhance business results through industry-specific solutions; and serves clients in communications, electronics, high technology, media, and entertainment industries. The company’s Financial Services segment offers services that help clients enhance cost efficiency, grow their customer base, manage risk, and transform their operations; and serves clients in banking, capital markets, and insurance industries. Its Health & Public Service segment provides research-based insights and offerings, including consulting services and digital solutions to help clients deliver social, economic, and health outcomes; and serves healthcare payers and providers, as well as government departments and agencies, public service organizations, educational institutions, and non-profit organizations. The company’s Products segment helps clients enhance their performance in distribution, sales, and marketing; in research and development, and manufacturing; and in business functions, such as finance, human resources, procurement, and supply chain. This segment serves clients in consumer goods, retail, and travel services industries; automotive, freight and logistics, industrial and electrical equipment, consumer durable and heavy equipment, and construction and infrastructure management companies; and pharmaceutical, medical technology, and biotechnology companies. The company’s Resources segment enables clients to develop and implement new business strategies, improve operations, manage complex change initiatives, and integrate digital technologies; and serves clients in chemicals, energy, forest products, metals and mining, and utilities and related industries. Accenture plc was founded in 1989 and is based in Dublin, Ireland.

FINANCIAL RATIOS  of  Accenture Cl A (ACN)

Valuation Ratios
P/E Ratio 19.2
Price to Sales 2.3
Price to Book 10.4
Price to Tangible Book
Price to Cash Flow 17.2
Price to Free Cash Flow 19.3
Growth Rates
Sales Growth Rate 5.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 25.8%
Cap. Spend. - 3 Yr. Gr. Rate 6.1%
Financial Strength
Quick Ratio 1636
Current Ratio 0.1
LT Debt to Equity 0.3%
Total Debt to Equity 0.4%
Interest Coverage 351
Management Effectiveness
Return On Assets 21.3%
Ret/ On Assets - 3 Yr. Avg. 18.4%
Return On Total Capital 59.8%
Ret/ On T. Cap. - 3 Yr. Avg. 55.3%
Return On Equity 60.1%
Return On Equity - 3 Yr. Avg. 55.5%
Asset Turnover 1.8
Profitability Ratios
Gross Margin 29.5%
Gross Margin - 3 Yr. Avg. 29.9%
EBITDA Margin 18.2%
EBITDA Margin - 3 Yr. Avg. 16.4%
Operating Margin 16.3%
Oper. Margin - 3 Yr. Avg. 14.4%
Pre-Tax Margin 16.1%
Pre-Tax Margin - 3 Yr. Avg. 14.3%
Net Profit Margin 11.8%
Net Profit Margin - 3 Yr. Avg. 10.1%
Effective Tax Rate 22.4%
Eff/ Tax Rate - 3 Yr. Avg. 24.8%
Payout Ratio 35%

ACN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ACN stock intrinsic value calculation we used $34798 million for the last fiscal year's total revenue generated by Accenture Cl A. The default revenue input number comes from 2016 income statement of Accenture Cl A. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our ACN stock valuation model: a) initial revenue growth rate of 6.4% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for ACN is calculated based on our internal credit rating of Accenture Cl A, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Accenture Cl A.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of ACN stock the variable cost ratio is equal to 35%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $17390 million in the base year in the intrinsic value calculation for ACN stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 59.3% for Accenture Cl A.

Corporate tax rate of 27% is the nominal tax rate for Accenture Cl A. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the ACN stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for ACN are equal to 1.6%.

Life of production assets of 5.2 years is the average useful life of capital assets used in Accenture Cl A operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for ACN is equal to -5.2%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $7555 million for Accenture Cl A - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 648.424 million for Accenture Cl A is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Accenture Cl A at the current share price and the inputted number of shares is $79.6 billion.


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COMPANY NEWS

▶ Company News for June 23, 2017   [11:32AM  Zacks]
▶ Accenture tops Street 3Q forecasts   [08:50PM  Associated Press]
▶ Solid Quarter for Accenture   [05:00PM  Morningstar]
▶ The Biggest Loser: Accenture Slides 4%   [04:27PM  Barrons.com]
▶ Accenture Q3 Earnings In-Line, Revenue Edges Views   [04:20PM  Investor's Business Daily]
▶ 4 Banks Near Buy Points Ahead Of Stress Test: Investing Action Plan   [Jun-21-17 04:25PM  Investor's Business Daily]
▶ Accenture's Push Into Digital, Cloud, Security Is Earnings Key   [04:05PM  Investor's Business Daily]
▶ Chartmaster: This is why you should sell the tech wreck   [Jun-12-17 05:07PM  CNBC Videos]
▶ Why Accenture bought this up-and-coming federal cloud firm   [Jun-07-17 02:40PM  American City Business Journals]
▶ [$$] Accenture Acquiring RLJ Equity-Backed Phase One   [11:32AM  The Wall Street Journal]
▶ 3 Large-Cap Stocks for Astute Investors   [10:30AM  Motley Fool]
▶ The Top Stories From This Week's Barron's   [Jun-03-17 01:25AM  Barrons.com]
▶ Accenture Acquires SolutionsIQ   [Jun-02-17 01:50PM  TheStreet.com]
▶ Accenture acquires consulting firm LabAnswer   [Jun-01-17 11:55AM  ZDNet]
Stock chart of ACN Financial statements of ACN Annual reports of ACN
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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