Intrinsic value of Accenture Cl A - ACN

Previous Close

$130.03

  Intrinsic Value

$137.20

stock screener

  Rating & Target

hold

+6%

  Value-price divergence*

+204%

Previous close

$130.03

 
Intrinsic value

$137.20

 
Up/down potential

+6%

 
Rating

hold

 
Value-price divergence*

+204%

*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 84.3

 

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
  6,285
  6,892
  7,551
  8,263
  9,030
  9,854
  10,740
  11,688
  12,703
  13,788
  14,946
  16,181
  17,496
  18,897
  20,386
  21,969
  23,651
  25,437
  27,332
  29,341
  31,471
  33,729
  36,120
  38,651
  41,331
  44,167
  47,166
  50,338
  53,692
  57,237
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
  1,367
  1,415
  1,477
  1,543
  1,612
  1,685
  1,763
  1,844
  1,930
  2,021
  2,116
  2,217
  2,323
  2,435
  2,552
  2,676
  2,806
  2,942
  3,086
  3,237
  3,396
  3,563
  3,738
  3,922
  4,116
  4,319
  4,533
  4,758
  4,994
  5,242
  5,502
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
  502
  509
  515
  522
  529
  537
  545
  554
  563
  573
  222
  232
  243
  255
  268
  281
  294
  309
  324
  340
  356
  374
  392
  412
  432
  453
  476
  499
  524
  550
Funds from operations, $m
  4,150
  4,713
  4,916
  5,141
  5,390
  5,664
  5,963
  6,290
  6,645
  7,030
  7,447
  7,800
  8,285
  8,808
  9,369
  9,971
  10,616
  11,307
  12,045
  12,834
  13,677
  14,575
  15,533
  16,554
  17,640
  18,795
  20,024
  21,330
  22,717
  24,190
  25,753
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
  4,791
  4,999
  5,229
  5,483
  5,761
  6,066
  6,399
  6,760
  7,151
  7,575
  7,934
  8,427
  8,956
  9,525
  10,135
  10,789
  11,489
  12,237
  13,036
  13,888
  14,798
  15,767
  16,799
  17,898
  19,067
  20,309
  21,629
  23,032
  24,520
  26,100
Maintenance CAPEX, $m
  0
  -137
  -142
  -148
  -154
  -161
  -169
  -176
  -184
  -193
  -202
  -212
  -222
  -232
  -243
  -255
  -268
  -281
  -294
  -309
  -324
  -340
  -356
  -374
  -392
  -412
  -432
  -453
  -476
  -499
  -524
New CAPEX, $m
  -497
  -48
  -62
  -65
  -69
  -73
  -77
  -82
  -86
  -91
  -96
  -101
  -106
  -112
  -117
  -124
  -130
  -137
  -144
  -151
  -159
  -167
  -175
  -184
  -194
  -203
  -214
  -225
  -236
  -248
  -260
Cash from investing activities, $m
  -610
  -185
  -204
  -213
  -223
  -234
  -246
  -258
  -270
  -284
  -298
  -313
  -328
  -344
  -360
  -379
  -398
  -418
  -438
  -460
  -483
  -507
  -531
  -558
  -586
  -615
  -646
  -678
  -712
  -747
  -784
Free cash flow, $m
  3,965
  4,606
  4,795
  5,016
  5,259
  5,527
  5,820
  6,141
  6,489
  6,868
  7,277
  7,622
  8,099
  8,612
  9,164
  9,757
  10,392
  11,072
  11,799
  12,576
  13,406
  14,292
  15,236
  16,241
  17,312
  18,452
  19,663
  20,951
  22,320
  23,773
  25,315
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
  5,165
  5,390
  5,645
  5,925
  6,231
  6,564
  6,925
  7,317
  7,740
  8,196
  8,590
  9,118
  9,685
  10,293
  10,944
  11,641
  12,385
  13,180
  14,028
  14,933
  15,896
  16,922
  18,014
  19,174
  20,408
  21,719
  23,111
  24,589
  26,156
  27,819
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
 
  9,952
  5,269
  5,517
  5,790
  6,088
  6,413
  6,766
  7,148
  7,562
  8,009
  8,393
  8,911
  9,467
  10,064
  10,703
  11,387
  12,118
  12,899
  13,733
  14,622
  15,570
  16,579
  17,653
  18,796
  20,010
  21,301
  22,672
  24,127
  25,672
  27,310
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
 
  9,542
  4,824
  4,801
  4,767
  4,719
  4,654
  4,571
  4,468
  4,344
  4,199
  3,986
  3,803
  3,600
  3,379
  3,142
  2,894
  2,637
  2,376
  2,115
  1,858
  1,610
  1,376
  1,157
  957
  778
  621
  487
  373
  280
  206
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 20.3
Price to Sales 2.4
Price to Book 11.1
Price to Tangible Book
Price to Cash Flow 18.3
Price to Free Cash Flow 20.5
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 3.9%.

Life of production assets of 10 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 $84.3 billion.

Management's discussion and analysis

Revenues are driven by the ability of our executives to secure new contracts and to deliver services and solutions that add value relevant to our clients’ current needs and challenges. The level of revenues we achieve is based on our ability to deliver market-leading service offerings and to deploy skilled teams of professionals quickly and on a global basis.
Our results of operations are affected by economic conditions, including macroeconomic conditions and levels of business confidence. There continues to be significant volatility and economic and geopolitical uncertainty in many markets around the world, which may impact our business. We continue to monitor the impact of this volatility and uncertainty and seek to manage our costs in order to respond to changing conditions. There also continues to be significant volatility in foreign currency exchange rates. The majority of our net revenues are denominated in currencies other than the U.S. dollar, including the Euro and the U.K. pound. Unfavorable fluctuations in foreign currency exchange rates have had and could have in the future a material effect on our financial results.
Revenues before reimbursements (“net revenues”) for the fourth quarter of fiscal 2016 increased 8% in U.S. dollars and 9% in local currency compared to the fourth quarter of fiscal 2015. Net revenues for fiscal 2016 increased 6% in U.S. dollars and 10% in local currency compared to fiscal 2015. Demand for our services and solutions continued to be strong, resulting in growth across all areas of our business. During the fourth quarter of fiscal 2016, revenue growth in local currency was significant in Products and strong in Health & Public Service and Financial Services. Communications, Media & Technology revenue growth in local currency was solid, while Resources was flat. Revenue growth in local currency was very strong in consulting and solid in outsourcing during the fourth quarter of fiscal 2016. While the business environment remained competitive, we experienced pricing improvement in several areas of our business in fiscal 2016. We use the term “pricing” to mean the contract profitability or margin on the work that we sell.
In our consulting business, net revenues for the fourth quarter of fiscal 2016 increased 11% in U.S. dollars and 13% in local currency compared to the fourth quarter of fiscal 2015. Net consulting revenues for fiscal 2016 increased 10% in U.S. dollars and 15% in local currency compared to fiscal 2015. Consulting revenue growth in local currency in the fourth quarter of fiscal 2016 was led by very significant growth in Products, as well as strong growth in Financial Services, Health & Public Service and Communications, Media & Technology, while Resources had a slight decline. We continue to experience growing demand for digital-related services and assisting clients with the adoption of new technologies. In addition, clients continued to be focused on initiatives designed to deliver cost savings and operational efficiency, as well as projects to integrate their global operations and grow and transform their businesses. Compared to fiscal 2015, we continued to provide a greater proportion of systems integration consulting through use of lower cost resources in our Global Delivery Network. This trend has resulted in work volume growing faster than revenue in our systems integration business, and we expect this trend to continue.
In our outsourcing business, net revenues for the fourth quarter of fiscal 2016 increased 4% in U.S. dollars and 6% in local currency compared to the fourth quarter of fiscal 2015. Net outsourcing revenues for fiscal 2016 increased 1% in U.S. dollars and 6% in local currency compared to fiscal 2015. Outsourcing revenue growth in local currency in the fourth quarter of fiscal 2016 was driven by very strong growth in Health & Public Service as well as solid growth in Products and Financial Services. We are experiencing growing demand to assist clients with cloud enablement and the operation and maintenance of digital-related services. In addition, clients continue to be focused on transforming 
their operations to improve effectiveness and save costs. Compared to fiscal 2015, we continued to provide a greater proportion of application outsourcing through use of lower-cost resources in our Global Delivery Network.
As we are a global company, our revenues are denominated in multiple currencies and may be significantly affected by currency exchange rate fluctuations. If the U.S. dollar strengthens against other currencies, resulting in unfavorable currency translation, our revenues, revenue growth and results of operations in U.S. dollars may be lower. If the U.S. dollar weakens against other currencies, resulting in favorable currency translation, our revenues, revenue growth and results of operations in U.S. dollars may be higher. When compared to the same periods in fiscal 2015, the U.S. dollar strengthened against many currencies during the fourth quarter and fiscal year ended August 31, 2016, resulting in unfavorable currency translation and U.S. dollar revenue growth that was approximately 2% and 5% lower, respectively, than our revenue growth in local currency. Assuming that exchange rates stay within recent ranges for fiscal 2017, we estimate that our full fiscal 2017 revenue growth in U.S. dollars will be approximately equal to our revenue growth in local currency.
The primary categories of operating expenses include Cost of services, Sales and marketing and General and administrative costs. Cost of services is primarily driven by the cost of client-service personnel, which consists mainly of compensation, subcontractor and other personnel costs, and non-payroll costs on outsourcing contracts. Cost of services includes a variety of activities such as: contract delivery; recruiting and training; software development; and integration of acquisitions. Sales and marketing costs are driven primarily by: compensation costs for business development activities; marketing- and advertising-related activities; and certain acquisition-related costs. General and administrative costs primarily include costs for non-client-facing personnel, information systems and office space.
Utilization for the fourth quarter of fiscal 2016 was 92%, up from 91% in the third quarter of fiscal 2016 and 90% in the fourth quarter of fiscal 2015. We continue to hire to meet current and projected future demand. We proactively plan and manage the size and composition of our workforce and take actions as needed to address changes in the anticipated demand for our services and solutions, given that compensation costs are the most significant portion of our operating expenses. Based on current and projected future demand, we have increased our headcount, the majority of which serve our clients, to approximately 384,000 as of August 31, 2016, compared to approximately 358,000 as of August 31, 2015. The year-over-year increase in our headcount reflects an overall increase in demand for our services and solutions, as well as headcount added in connection with acquisitions. Annualized attrition, excluding involuntary terminations, for the fourth quarter of fiscal 2016 was 16%, up from 15%in the third quarter of fiscal 2016 and 14% in the fourth quarter of fiscal 2015. We evaluate voluntary attrition, adjust levels of new hiring and use involuntary terminations as means to keep our supply of skills and resources in balance with changes in client demand. In addition, we adjust compensation in certain skill sets and geographies in order to attract and retain appropriate numbers of qualified employees. For the majority of our personnel, compensation increases for fiscal 2016 became effective December 1, 2015. We strive to adjust pricing and/or the mix of resources to reduce the impact of compensation increases on our gross margin. Our ability to grow our revenues and maintain or increase our margin could be adversely affected if we are unable to: keep our supply of skills and resources in balance with changes in the types or amounts of services and solutions clients are demanding; recover increases in compensation; deploy our employees globally on a timely basis; manage attrition; and/or effectively assimilate and utilize new employees.
Gross margin (Net revenues less Cost of services before reimbursable expenses as a percentage of Net revenues) for the fourth quarter of fiscal 2016 was 31.3%, compared with 31.7% for the fourth quarter of fiscal 2015. Gross margin for fiscal 2016was 31.3%, compared with 31.6% for fiscal 2015. The reduction in gross margin for fiscal 2016 was principally due to higher labor costs and higher costs associated with acquisition activities compared to fiscal 2015.
Sales and marketing and General and administrative costs as a percentage of net revenues were 17.2% for the fourth quarter of fiscal 2016, compared with 17.9% for the fourth quarter of fiscal 2015. Sales and marketing and General and administrative costs as a percentage of net revenues were 16.6% for fiscal 2016, compared with 17.1% for fiscal 2015. We continuously monitor these costs and implement cost-management actions, as appropriate. For fiscal 2016 compared to fiscal 2015, Sales and marketing costs as a percentage of net revenues decreased 40 basis points principally due to improved operational efficiency in our business development activities, and General and administrative costs as a percentage of net revenues decreased 10 basis points.
Operating expenses in fiscal 2015 included a Pension settlement charge of $64 million related to lump sum cash payments made from our U.S. defined benefit pension plan to former employees who elected to receive such payments. For additional information, see Note 10 (Retirement and Profit Sharing Plans) to our Consolidated Financial Statements under Item 8, “Financial Statements and Supplementary Data.”
Operating margin (Operating income as a percentage of Net revenues) for the fourth quarter of fiscal 2016 was 14.1%, compared with 13.9% for the fourth quarter of fiscal 2015. Operating margin for fiscal 2016 was 14.6%, compared with 14.3% for fiscal 2015. The Pension settlement charge of $64 million recorded in fiscal 2015 decreased operating 
margin by 20 basis points for fiscal 2015. Excluding the effect of the Pension settlement charge, operating margin for fiscal 2015 would have been 14.5%.
During fiscal 2016, we recorded a $548 million gain on sale of business and $56 million in taxes related to the divestiture of our Navitaire business, as well as a $301 million gain on sale of business and $48 million in taxes related to the partial divestiture of our Duck Creek business. For additional information, see Note 5 (Business Combinations and Divestitures) to our Consolidated Financial Statements under Item 8, “Financial Statements and Supplementary Data.”
The effective tax rate for fiscal 2016 was 22.4%, compared with 25.8% for fiscal 2015. Absent the $849 million Gain on sale of businesses and related $104 million in taxes recorded during fiscal 2016, our effective tax rate for fiscal 2016 would have been 24.2%. Absent the $64 million Pension settlement charge and related $25 million in taxes recorded during fiscal 2015, our effective tax rate for fiscal 2015 would have been 26.0%.
Diluted earnings per share were $6.45 for fiscal 2016, compared with $4.76 for fiscal 2015. The Gain on sale of businesses, net of taxes, recorded during fiscal 2016 increased Diluted earnings per share by $1.11 in fiscal 2016. The Pension settlement charge, net of taxes, recorded during fiscal 2015 decreased Diluted earnings per share by $0.06 in fiscal 2015. Excluding these impacts, Diluted earnings per share would have been $5.34 and $4.82 for fiscal 2016 and 2015, respectively.
We have presented Operating income, operating margin, effective tax rate and Diluted earnings per share excluding the impacts of the fiscal 2016 Gain on sale of businesses and the fiscal 2015 Pension settlement charge, as we believe doing so facilitates understanding as to both the impacts of these items and our operating performance in comparison to the prior period.
Our Operating income and Diluted earnings per share are affected by currency exchange rate fluctuations on revenues and costs. Most of our costs are incurred in the same currency as the related net revenues. Where practical, we seek to manage foreign currency exposure for costs not incurred in the same currency as the related net revenues, such as the cost of our Global Delivery Network, by using currency protection provisions in our customer contracts and through our hedging programs. We seek to manage our costs, taking into consideration the residual positive and negative effects of changes in foreign exchange rates on those costs.

[Source: Form 10-K dated 2016-10-28]

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