Intrinsic value of Accenture Cl A - ACN

Previous Close

$139.49

  Intrinsic Value

$163.07

stock screener

  Rating & Target

hold

+17%

Previous close

$139.49

 
Intrinsic value

$163.07

 
Up/down potential

+17%

 
Rating

hold

*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 2017), $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 89.9

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  5.65
  7.50
  7.25
  7.02
  6.82
  6.64
  6.48
  6.33
  6.20
  6.08
  5.97
  5.87
  5.78
  5.71
  5.64
  5.57
  5.51
  5.46
  5.42
  5.38
  5.34
  5.30
  5.27
  5.25
  5.22
  5.20
  5.18
  5.16
  5.15
  5.13
  5.12
Revenue, $m
  36,765
  39,522
  42,388
  45,365
  48,461
  51,678
  55,025
  58,508
  62,133
  65,908
  69,842
  73,942
  78,220
  82,683
  87,343
  92,209
  97,294
  102,610
  108,168
  113,982
  120,066
  126,435
  133,102
  140,085
  147,400
  155,064
  163,095
  171,513
  180,338
  189,591
  199,294
Variable operating expenses, $m
 
  33,043
  35,402
  37,854
  40,402
  43,052
  45,808
  48,675
  51,660
  54,768
  58,007
  60,884
  64,406
  68,081
  71,917
  75,925
  80,112
  84,488
  89,065
  93,852
  98,862
  104,106
  109,596
  115,345
  121,368
  127,679
  134,292
  141,223
  148,490
  156,108
  164,098
Fixed operating expenses, $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
Total operating expenses, $m
  32,133
  33,043
  35,402
  37,854
  40,402
  43,052
  45,808
  48,675
  51,660
  54,768
  58,007
  60,884
  64,406
  68,081
  71,917
  75,925
  80,112
  84,488
  89,065
  93,852
  98,862
  104,106
  109,596
  115,345
  121,368
  127,679
  134,292
  141,223
  148,490
  156,108
  164,098
Operating income, $m
  4,632
  6,480
  6,986
  7,512
  8,058
  8,626
  9,218
  9,833
  10,473
  11,139
  11,834
  13,059
  13,814
  14,602
  15,425
  16,285
  17,183
  18,121
  19,103
  20,130
  21,204
  22,329
  23,507
  24,740
  26,032
  27,385
  28,803
  30,290
  31,849
  33,483
  35,196
EBITDA, $m
  5,434
  7,105
  7,620
  8,156
  8,712
  9,291
  9,892
  10,518
  11,170
  11,849
  12,556
  13,293
  14,062
  14,865
  15,702
  16,577
  17,492
  18,447
  19,446
  20,492
  21,586
  22,730
  23,929
  25,184
  26,499
  27,877
  29,321
  30,835
  32,421
  34,085
  35,829
Interest expense (income), $m
  0
  1
  37
  74
  113
  154
  196
  239
  285
  332
  382
  433
  487
  543
  601
  662
  726
  792
  861
  934
  1,010
  1,090
  1,173
  1,260
  1,351
  1,447
  1,547
  1,652
  1,762
  1,878
  1,999
Earnings before tax, $m
  4,616
  6,479
  6,949
  7,437
  7,945
  8,473
  9,022
  9,593
  10,188
  10,807
  11,453
  12,626
  13,327
  14,060
  14,824
  15,623
  16,457
  17,329
  18,242
  19,196
  20,194
  21,239
  22,334
  23,480
  24,680
  25,938
  27,256
  28,638
  30,086
  31,605
  33,198
Tax expense, $m
  981
  1,749
  1,876
  2,008
  2,145
  2,288
  2,436
  2,590
  2,751
  2,918
  3,092
  3,409
  3,598
  3,796
  4,003
  4,218
  4,443
  4,679
  4,925
  5,183
  5,452
  5,735
  6,030
  6,339
  6,664
  7,003
  7,359
  7,732
  8,123
  8,533
  8,963
Net income, $m
  3,445
  4,730
  5,073
  5,429
  5,800
  6,185
  6,586
  7,003
  7,437
  7,889
  8,360
  9,217
  9,729
  10,264
  10,822
  11,405
  12,014
  12,650
  13,316
  14,013
  14,742
  15,505
  16,304
  17,140
  18,016
  18,935
  19,897
  20,906
  21,963
  23,072
  24,234

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  4,130
  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
  22,690
  19,951
  21,397
  22,900
  24,463
  26,087
  27,777
  29,534
  31,364
  33,270
  35,256
  37,326
  39,485
  41,738
  44,090
  46,547
  49,114
  51,797
  54,603
  57,538
  60,609
  63,824
  67,189
  70,714
  74,407
  78,275
  82,330
  86,579
  91,034
  95,705
  100,603
Adjusted assets (=assets-cash), $m
  18,560
  19,951
  21,397
  22,900
  24,463
  26,087
  27,777
  29,534
  31,364
  33,270
  35,256
  37,326
  39,485
  41,738
  44,090
  46,547
  49,114
  51,797
  54,603
  57,538
  60,609
  63,824
  67,189
  70,714
  74,407
  78,275
  82,330
  86,579
  91,034
  95,705
  100,603
Revenue / Adjusted assets
  1.981
  1.981
  1.981
  1.981
  1.981
  1.981
  1.981
  1.981
  1.981
  1.981
  1.981
  1.981
  1.981
  1.981
  1.981
  1.981
  1.981
  1.981
  1.981
  1.981
  1.981
  1.981
  1.981
  1.981
  1.981
  1.981
  1.981
  1.981
  1.981
  1.981
  1.981
Average production assets, $m
  734
  790
  848
  907
  969
  1,034
  1,101
  1,170
  1,243
  1,318
  1,397
  1,479
  1,564
  1,654
  1,747
  1,844
  1,946
  2,052
  2,163
  2,280
  2,401
  2,529
  2,662
  2,802
  2,948
  3,101
  3,262
  3,430
  3,607
  3,792
  3,986
Working capital, $m
  2,273
  -1,976
  -2,119
  -2,268
  -2,423
  -2,584
  -2,751
  -2,925
  -3,107
  -3,295
  -3,492
  -3,697
  -3,911
  -4,134
  -4,367
  -4,610
  -4,865
  -5,130
  -5,408
  -5,699
  -6,003
  -6,322
  -6,655
  -7,004
  -7,370
  -7,753
  -8,155
  -8,576
  -9,017
  -9,480
  -9,965
Total debt, $m
  25
  1,048
  2,118
  3,230
  4,386
  5,588
  6,839
  8,139
  9,494
  10,904
  12,373
  13,905
  15,503
  17,170
  18,911
  20,729
  22,628
  24,614
  26,690
  28,862
  31,135
  33,513
  36,004
  38,613
  41,345
  44,208
  47,208
  50,353
  53,649
  57,106
  60,730
Total liabilities, $m
  13,740
  14,764
  15,834
  16,946
  18,102
  19,304
  20,555
  21,855
  23,210
  24,620
  26,089
  27,621
  29,219
  30,886
  32,627
  34,445
  36,344
  38,330
  40,406
  42,578
  44,851
  47,229
  49,720
  52,329
  55,061
  57,924
  60,924
  64,069
  67,365
  70,822
  74,446
Total equity, $m
  8,949
  5,187
  5,563
  5,954
  6,360
  6,783
  7,222
  7,679
  8,155
  8,650
  9,166
  9,705
  10,266
  10,852
  11,463
  12,102
  12,770
  13,467
  14,197
  14,960
  15,758
  16,594
  17,469
  18,386
  19,346
  20,352
  21,406
  22,511
  23,669
  24,883
  26,157
Total liabilities and equity, $m
  22,689
  19,951
  21,397
  22,900
  24,462
  26,087
  27,777
  29,534
  31,365
  33,270
  35,255
  37,326
  39,485
  41,738
  44,090
  46,547
  49,114
  51,797
  54,603
  57,538
  60,609
  63,823
  67,189
  70,715
  74,407
  78,276
  82,330
  86,580
  91,034
  95,705
  100,603
Debt-to-equity ratio
  0.003
  0.200
  0.380
  0.540
  0.690
  0.820
  0.950
  1.060
  1.160
  1.260
  1.350
  1.430
  1.510
  1.580
  1.650
  1.710
  1.770
  1.830
  1.880
  1.930
  1.980
  2.020
  2.060
  2.100
  2.140
  2.170
  2.210
  2.240
  2.270
  2.290
  2.320
Adjusted equity ratio
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260
  0.260

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  3,445
  4,730
  5,073
  5,429
  5,800
  6,185
  6,586
  7,003
  7,437
  7,889
  8,360
  9,217
  9,729
  10,264
  10,822
  11,405
  12,014
  12,650
  13,316
  14,013
  14,742
  15,505
  16,304
  17,140
  18,016
  18,935
  19,897
  20,906
  21,963
  23,072
  24,234
Depreciation, amort., depletion, $m
  802
  626
  635
  644
  654
  664
  675
  686
  697
  709
  722
  235
  248
  262
  277
  293
  309
  326
  343
  362
  381
  401
  423
  445
  468
  492
  518
  544
  573
  602
  633
Funds from operations, $m
  4,253
  5,355
  5,708
  6,074
  6,454
  6,850
  7,261
  7,689
  8,135
  8,599
  9,082
  9,451
  9,977
  10,526
  11,099
  11,697
  12,323
  12,976
  13,660
  14,375
  15,123
  15,906
  16,726
  17,585
  18,484
  19,427
  20,415
  21,450
  22,536
  23,674
  24,867
Change in working capital, $m
  -720
  -138
  -143
  -149
  -155
  -161
  -167
  -174
  -181
  -189
  -197
  -205
  -214
  -223
  -233
  -243
  -254
  -266
  -278
  -291
  -304
  -318
  -333
  -349
  -366
  -383
  -402
  -421
  -441
  -463
  -485
Cash from operations, $m
  4,973
  5,493
  5,851
  6,222
  6,609
  7,010
  7,428
  7,863
  8,316
  8,787
  9,279
  9,656
  10,191
  10,749
  11,332
  11,941
  12,577
  13,242
  13,938
  14,665
  15,427
  16,224
  17,059
  17,934
  18,850
  19,810
  20,816
  21,871
  22,977
  24,136
  25,352
Maintenance CAPEX, $m
  0
  -116
  -125
  -135
  -144
  -154
  -164
  -175
  -186
  -197
  -209
  -222
  -235
  -248
  -262
  -277
  -293
  -309
  -326
  -343
  -362
  -381
  -401
  -423
  -445
  -468
  -492
  -518
  -544
  -573
  -602
New CAPEX, $m
  -516
  -57
  -57
  -60
  -62
  -64
  -67
  -70
  -72
  -76
  -79
  -82
  -86
  -89
  -93
  -97
  -102
  -106
  -111
  -116
  -122
  -127
  -133
  -140
  -146
  -153
  -161
  -168
  -176
  -185
  -194
Cash from investing activities, $m
  -2,234
  -173
  -182
  -195
  -206
  -218
  -231
  -245
  -258
  -273
  -288
  -304
  -321
  -337
  -355
  -374
  -395
  -415
  -437
  -459
  -484
  -508
  -534
  -563
  -591
  -621
  -653
  -686
  -720
  -758
  -796
Free cash flow, $m
  2,739
  5,320
  5,668
  6,028
  6,403
  6,792
  7,197
  7,619
  8,058
  8,515
  8,991
  9,353
  9,871
  10,412
  10,976
  11,566
  12,182
  12,827
  13,501
  14,206
  14,944
  15,716
  16,525
  17,372
  18,259
  19,189
  20,163
  21,185
  22,256
  23,379
  24,556
Issuance/(repayment) of debt, $m
  0
  1,026
  1,070
  1,112
  1,156
  1,202
  1,250
  1,301
  1,354
  1,410
  1,469
  1,532
  1,598
  1,667
  1,741
  1,818
  1,900
  1,986
  2,076
  2,172
  2,273
  2,379
  2,491
  2,608
  2,732
  2,863
  3,000
  3,145
  3,297
  3,456
  3,624
Issuance/(repurchase) of shares, $m
  -1,973
  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  
  -1,992
  1,026
  1,070
  1,112
  1,156
  1,202
  1,250
  1,301
  1,354
  1,410
  1,469
  1,532
  1,598
  1,667
  1,741
  1,818
  1,900
  1,986
  2,076
  2,172
  2,273
  2,379
  2,491
  2,608
  2,732
  2,863
  3,000
  3,145
  3,297
  3,456
  3,624
Total cash flow (excl. dividends), $m
  789
  6,345
  6,738
  7,141
  7,559
  7,994
  8,447
  8,920
  9,412
  9,925
  10,461
  10,885
  11,469
  12,079
  12,717
  13,384
  14,082
  14,812
  15,577
  16,378
  17,216
  18,095
  19,015
  19,980
  20,992
  22,052
  23,164
  24,330
  25,552
  26,835
  28,181
Retained Cash Flow (-), $m
  -1,394
  -365
  -376
  -391
  -406
  -422
  -439
  -457
  -476
  -495
  -516
  -538
  -561
  -586
  -612
  -639
  -667
  -698
  -730
  -763
  -799
  -836
  -875
  -916
  -960
  -1,006
  -1,054
  -1,105
  -1,158
  -1,214
  -1,273
Prev. year cash balance distribution, $m
 
  4,127
  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
 
  10,107
  6,362
  6,750
  7,153
  7,572
  8,008
  8,463
  8,936
  9,429
  9,944
  10,346
  10,907
  11,493
  12,105
  12,745
  13,415
  14,115
  14,848
  15,615
  16,418
  17,259
  18,140
  19,064
  20,032
  21,046
  22,109
  23,225
  24,394
  25,621
  26,907
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
 
  9,690
  5,825
  5,874
  5,890
  5,869
  5,812
  5,717
  5,585
  5,417
  5,213
  4,913
  4,655
  4,370
  4,064
  3,742
  3,409
  3,071
  2,734
  2,404
  2,086
  1,785
  1,505
  1,249
  1,020
  819
  645
  498
  377
  280
  203
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 is a professional services company serving clients in various industries and in geographic regions, including North America, Europe and Growth Markets. The Company provides management and technology consulting services. Its segments include Communications, Media and Technology; Financial Services; Health and Public Service; Products, and Resources. The Communications, Media & Technology segment serves communications, electronics, technology, media and entertainment industries. The Financial Services segment serves banking, capital markets and insurance industries. The Health & Public service segment serves healthcare payers and providers, and government departments and agencies, public service organizations, educational institutions and non-profit organizations. The Products segment serves a set of interconnected consumer-relevant industries. The Resources segment serves chemicals, energy, forest products, metals and mining, utilities and related industries.

FINANCIAL RATIOS  of  Accenture Cl A (ACN)

Valuation Ratios
P/E Ratio 26
Price to Sales 2.4
Price to Book 10
Price to Tangible Book
Price to Cash Flow 18
Price to Free Cash Flow 20.1
Growth Rates
Sales Growth Rate 5.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 3.8%
Cap. Spend. - 3 Yr. Gr. Rate 9.9%
Financial Strength
Quick Ratio 1377
Current Ratio 0.1
LT Debt to Equity 0.2%
Total Debt to Equity 0.3%
Interest Coverage 0
Management Effectiveness
Return On Assets 15.9%
Ret/ On Assets - 3 Yr. Avg. 18%
Return On Total Capital 41.6%
Ret/ On T. Cap. - 3 Yr. Avg. 50.9%
Return On Equity 41.7%
Return On Equity - 3 Yr. Avg. 51.1%
Asset Turnover 1.7
Profitability Ratios
Gross Margin 30%
Gross Margin - 3 Yr. Avg. 29.8%
EBITDA Margin 14.7%
EBITDA Margin - 3 Yr. Avg. 16.1%
Operating Margin 12.6%
Oper. Margin - 3 Yr. Avg. 14.1%
Pre-Tax Margin 12.6%
Pre-Tax Margin - 3 Yr. Avg. 14%
Net Profit Margin 9.4%
Net Profit Margin - 3 Yr. Avg. 10.2%
Effective Tax Rate 21.3%
Eff/ Tax Rate - 3 Yr. Avg. 23.1%
Payout Ratio 45.5%

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 $36765 million for the last fiscal year's total revenue generated by Accenture Cl A. The default revenue input number comes from 2017 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 7.5% 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 83.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 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 3.5% 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 2%.

Life of production assets of 6.3 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%. 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 - $8949 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 644.777 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 $89.9 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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Financial statements of ACN
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