Intrinsic value of Accenture Cl A - ACN

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$121.30

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$121.30

 
Intrinsic value

$139.07

 
Up/down potential

+15%

 
Rating

hold

 
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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 78.1

 

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
  4.30
  4.37
  4.43
  4.49
  4.54
  4.59
  4.63
  4.67
  4.70
  4.73
  4.76
  4.78
  4.80
  4.82
  4.84
  4.86
  4.87
  4.88
  4.89
  4.91
  4.91
  4.92
  4.93
  4.94
  4.94
  4.95
  4.95
  4.96
  4.96
  4.97
Revenue, $m
  34,798
  36,294
  37,880
  39,560
  41,336
  43,213
  45,195
  47,286
  49,492
  51,818
  54,268
  56,849
  59,567
  62,427
  65,438
  68,605
  71,936
  75,439
  79,123
  82,996
  87,068
  91,347
  95,844
  100,571
  105,537
  110,755
  116,237
  121,996
  128,046
  134,401
  141,077
Variable operating expenses, $m
 
  12,687
  13,226
  13,796
  14,400
  15,037
  15,710
  16,421
  17,170
  17,960
  18,792
  19,308
  20,231
  21,202
  22,224
  23,300
  24,432
  25,621
  26,873
  28,188
  29,571
  31,024
  32,552
  34,157
  35,843
  37,615
  39,477
  41,433
  43,488
  45,647
  47,914
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
  30,512
  31,496
  32,523
  33,595
  34,712
  35,877
  37,092
  38,358
  39,678
  41,053
  42,125
  43,619
  45,174
  46,796
  48,486
  50,248
  52,082
  53,995
  55,989
  58,067
  60,232
  62,490
  64,844
  67,297
  69,855
  72,523
  75,305
  78,207
  81,234
  84,391
Operating income, $m
  5,659
  5,782
  6,384
  7,036
  7,741
  8,500
  9,317
  10,194
  11,134
  12,140
  13,216
  14,724
  15,948
  17,253
  18,641
  20,119
  21,689
  23,357
  25,128
  27,008
  29,001
  31,115
  33,355
  35,727
  38,240
  40,899
  43,713
  46,690
  49,839
  53,168
  56,687
EBITDA, $m
  6,388
  6,255
  6,861
  7,519
  8,229
  8,994
  9,817
  10,701
  11,648
  12,661
  13,743
  14,899
  16,132
  17,445
  18,843
  20,330
  21,910
  23,589
  25,372
  27,263
  29,269
  31,396
  33,650
  36,037
  38,564
  41,240
  44,071
  47,066
  50,233
  53,581
  57,121
Interest expense (income), $m
  16
  14
  346
  699
  1,072
  1,467
  1,884
  2,325
  2,790
  3,281
  3,798
  4,343
  4,917
  5,521
  6,157
  6,827
  7,531
  8,272
  9,051
  9,870
  10,731
  11,637
  12,588
  13,588
  14,639
  15,744
  16,904
  18,123
  19,404
  20,749
  22,163
Earnings before tax, $m
  5,604
  5,768
  6,038
  6,337
  6,669
  7,033
  7,433
  7,869
  8,344
  8,860
  9,418
  10,381
  11,032
  11,732
  12,484
  13,292
  14,158
  15,085
  16,077
  17,138
  18,270
  19,478
  20,766
  22,139
  23,600
  25,155
  26,809
  28,567
  30,435
  32,419
  34,524
Tax expense, $m
  1,254
  1,557
  1,630
  1,711
  1,801
  1,899
  2,007
  2,125
  2,253
  2,392
  2,543
  2,803
  2,979
  3,168
  3,371
  3,589
  3,823
  4,073
  4,341
  4,627
  4,933
  5,259
  5,607
  5,978
  6,372
  6,792
  7,238
  7,713
  8,217
  8,753
  9,322
Net income, $m
  4,112
  4,211
  4,408
  4,626
  4,868
  5,134
  5,426
  5,745
  6,091
  6,467
  6,875
  7,578
  8,053
  8,564
  9,113
  9,703
  10,335
  11,012
  11,737
  12,511
  13,337
  14,219
  15,160
  16,161
  17,228
  18,363
  19,571
  20,854
  22,218
  23,666
  25,203

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
  16,378
  17,094
  17,852
  18,653
  19,500
  20,395
  21,339
  22,334
  23,383
  24,489
  25,654
  26,880
  28,171
  29,530
  30,959
  32,462
  34,043
  35,705
  37,453
  39,290
  41,222
  43,251
  45,384
  47,625
  49,979
  52,453
  55,052
  57,783
  60,650
  63,663
Adjusted assets (=assets-cash), $m
  15,701
  16,378
  17,094
  17,852
  18,653
  19,500
  20,395
  21,339
  22,334
  23,383
  24,489
  25,654
  26,880
  28,171
  29,530
  30,959
  32,462
  34,043
  35,705
  37,453
  39,290
  41,222
  43,251
  45,384
  47,625
  49,979
  52,453
  55,052
  57,783
  60,650
  63,663
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
  541
  581
  606
  633
  661
  691
  723
  757
  792
  829
  868
  910
  953
  999
  1,047
  1,098
  1,151
  1,207
  1,266
  1,328
  1,393
  1,462
  1,534
  1,609
  1,689
  1,772
  1,860
  1,952
  2,049
  2,150
  2,257
Working capital, $m
  3,097
  -1,887
  -1,970
  -2,057
  -2,149
  -2,247
  -2,350
  -2,459
  -2,574
  -2,695
  -2,822
  -2,956
  -3,097
  -3,246
  -3,403
  -3,567
  -3,741
  -3,923
  -4,114
  -4,316
  -4,528
  -4,750
  -4,984
  -5,230
  -5,488
  -5,759
  -6,044
  -6,344
  -6,658
  -6,989
  -7,336
Total debt, $m
  27
  583
  1,178
  1,808
  2,474
  3,178
  3,921
  4,705
  5,533
  6,405
  7,324
  8,291
  9,310
  10,383
  11,512
  12,700
  13,949
  15,263
  16,644
  18,097
  19,623
  21,228
  22,915
  24,687
  26,549
  28,506
  30,562
  32,721
  34,990
  37,374
  39,877
Total liabilities, $m
  13,054
  13,610
  14,205
  14,835
  15,501
  16,205
  16,948
  17,732
  18,560
  19,432
  20,351
  21,318
  22,337
  23,410
  24,539
  25,727
  26,976
  28,290
  29,671
  31,124
  32,650
  34,255
  35,942
  37,714
  39,576
  41,533
  43,589
  45,748
  48,017
  50,401
  52,904
Total equity, $m
  7,555
  2,768
  2,889
  3,017
  3,152
  3,296
  3,447
  3,606
  3,774
  3,952
  4,139
  4,336
  4,543
  4,761
  4,990
  5,232
  5,486
  5,753
  6,034
  6,330
  6,640
  6,966
  7,309
  7,670
  8,049
  8,447
  8,865
  9,304
  9,765
  10,250
  10,759
Total liabilities and equity, $m
  20,609
  16,378
  17,094
  17,852
  18,653
  19,501
  20,395
  21,338
  22,334
  23,384
  24,490
  25,654
  26,880
  28,171
  29,529
  30,959
  32,462
  34,043
  35,705
  37,454
  39,290
  41,221
  43,251
  45,384
  47,625
  49,980
  52,454
  55,052
  57,782
  60,651
  63,663
Debt-to-equity ratio
  0.004
  0.210
  0.410
  0.600
  0.780
  0.960
  1.140
  1.300
  1.470
  1.620
  1.770
  1.910
  2.050
  2.180
  2.310
  2.430
  2.540
  2.650
  2.760
  2.860
  2.960
  3.050
  3.130
  3.220
  3.300
  3.370
  3.450
  3.520
  3.580
  3.650
  3.710
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
  4,211
  4,408
  4,626
  4,868
  5,134
  5,426
  5,745
  6,091
  6,467
  6,875
  7,578
  8,053
  8,564
  9,113
  9,703
  10,335
  11,012
  11,737
  12,511
  13,337
  14,219
  15,160
  16,161
  17,228
  18,363
  19,571
  20,854
  22,218
  23,666
  25,203
Depreciation, amort., depletion, $m
  729
  473
  477
  483
  488
  494
  500
  506
  513
  520
  528
  175
  183
  192
  201
  211
  221
  232
  243
  255
  268
  281
  295
  309
  325
  341
  358
  375
  394
  414
  434
Funds from operations, $m
  4,150
  4,683
  4,885
  5,109
  5,356
  5,628
  5,926
  6,251
  6,604
  6,988
  7,403
  7,753
  8,236
  8,756
  9,315
  9,914
  10,557
  11,244
  11,980
  12,766
  13,605
  14,500
  15,454
  16,471
  17,553
  18,704
  19,928
  21,229
  22,612
  24,079
  25,637
Change in working capital, $m
  -425
  -78
  -82
  -87
  -92
  -98
  -103
  -109
  -115
  -121
  -127
  -134
  -141
  -149
  -157
  -165
  -173
  -182
  -192
  -201
  -212
  -223
  -234
  -246
  -258
  -271
  -285
  -299
  -315
  -330
  -347
Cash from operations, $m
  4,575
  4,786
  4,968
  5,196
  5,449
  5,726
  6,029
  6,360
  6,719
  7,109
  7,530
  7,888
  8,378
  8,905
  9,471
  10,079
  10,730
  11,427
  12,172
  12,967
  13,817
  14,723
  15,688
  16,717
  17,811
  18,976
  20,213
  21,529
  22,926
  24,410
  25,984
Maintenance CAPEX, $m
  0
  -104
  -112
  -117
  -122
  -127
  -133
  -139
  -145
  -152
  -159
  -167
  -175
  -183
  -192
  -201
  -211
  -221
  -232
  -243
  -255
  -268
  -281
  -295
  -309
  -325
  -341
  -358
  -375
  -394
  -414
New CAPEX, $m
  -497
  -40
  -25
  -27
  -28
  -30
  -32
  -33
  -35
  -37
  -39
  -41
  -43
  -46
  -48
  -51
  -53
  -56
  -59
  -62
  -65
  -68
  -72
  -76
  -79
  -83
  -88
  -92
  -97
  -102
  -107
Cash from investing activities, $m
  -610
  -144
  -137
  -144
  -150
  -157
  -165
  -172
  -180
  -189
  -198
  -208
  -218
  -229
  -240
  -252
  -264
  -277
  -291
  -305
  -320
  -336
  -353
  -371
  -388
  -408
  -429
  -450
  -472
  -496
  -521
Free cash flow, $m
  3,965
  4,642
  4,831
  5,053
  5,298
  5,569
  5,864
  6,187
  6,538
  6,919
  7,331
  7,679
  8,159
  8,676
  9,231
  9,827
  10,465
  11,149
  11,881
  12,662
  13,496
  14,386
  15,335
  16,346
  17,422
  18,567
  19,785
  21,079
  22,454
  23,914
  25,463
Issuance/(repayment) of debt, $m
  -1
  559
  595
  630
  666
  704
  743
  784
  827
  872
  919
  968
  1,019
  1,073
  1,129
  1,188
  1,249
  1,314
  1,381
  1,452
  1,527
  1,605
  1,687
  1,772
  1,862
  1,957
  2,056
  2,160
  2,269
  2,383
  2,503
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
  559
  595
  630
  666
  704
  743
  784
  827
  872
  919
  968
  1,019
  1,073
  1,129
  1,188
  1,249
  1,314
  1,381
  1,452
  1,527
  1,605
  1,687
  1,772
  1,862
  1,957
  2,056
  2,160
  2,269
  2,383
  2,503
Total cash flow (excl. dividends), $m
  1,983
  5,202
  5,425
  5,683
  5,964
  6,272
  6,608
  6,972
  7,366
  7,791
  8,250
  8,647
  9,178
  9,749
  10,360
  11,015
  11,715
  12,463
  13,262
  14,114
  15,023
  15,991
  17,022
  18,118
  19,285
  20,524
  21,841
  23,239
  24,723
  26,297
  27,967
Retained Cash Flow (-), $m
  -1,421
  -118
  -121
  -128
  -135
  -143
  -151
  -160
  -168
  -177
  -187
  -197
  -207
  -218
  -230
  -242
  -254
  -267
  -281
  -295
  -310
  -326
  -343
  -360
  -379
  -398
  -418
  -439
  -461
  -485
  -509
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
 
  9,989
  5,304
  5,554
  5,829
  6,129
  6,456
  6,812
  7,197
  7,614
  8,063
  8,450
  8,971
  9,530
  10,130
  10,773
  11,461
  12,196
  12,981
  13,819
  14,713
  15,665
  16,679
  17,758
  18,906
  20,126
  21,423
  22,800
  24,261
  25,813
  27,458
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
 
  9,577
  4,856
  4,834
  4,800
  4,751
  4,686
  4,602
  4,498
  4,374
  4,227
  4,013
  3,828
  3,624
  3,401
  3,163
  2,912
  2,654
  2,391
  2,128
  1,870
  1,620
  1,384
  1,164
  963
  783
  625
  489
  375
  282
  207
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
Price to Sales 2.2
Price to Book 10.3
Price to Tangible Book
Price to Cash Flow 17
Price to Free Cash Flow 19.1
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 4.3% 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 643.727 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 $78.1 billion.


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Stock chart of ACN Financial statements of ACN
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