Intrinsic value of Accenture Cl A - ACN

Previous Close

$155.53

  Intrinsic Value

$63.16

stock screener

  Rating & Target

str. sell

-59%

Previous close

$155.53

 
Intrinsic value

$63.16

 
Up/down potential

-59%

 
Rating

str. sell

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 0001), $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 99.7

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  15.80
  14.72
  13.75
  12.87
  12.09
  11.38
  10.74
  10.17
  9.65
  9.18
  8.77
  8.39
  8.05
  7.75
  7.47
  7.22
  7.00
  6.80
  6.62
  6.46
  6.31
  6.18
  6.06
  5.96
  5.86
  5.78
  5.70
  5.63
  5.57
  5.51
Revenue, $m
  42,574
  48,841
  55,556
  62,708
  70,287
  78,283
  86,691
  95,503
  104,719
  114,336
  124,358
  134,791
  145,642
  156,922
  168,646
  180,828
  193,488
  206,648
  220,330
  234,561
  249,369
  264,784
  280,839
  297,569
  315,011
  333,204
  352,189
  372,011
  392,714
  414,347
Variable operating expenses, $m
  36,620
  41,937
  47,634
  53,701
  60,131
  66,915
  74,048
  81,525
  89,343
  97,502
  105,505
  114,356
  123,562
  133,132
  143,078
  153,413
  164,154
  175,319
  186,926
  199,000
  211,563
  224,641
  238,262
  252,456
  267,254
  282,688
  298,795
  315,612
  333,176
  351,530
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
  36,620
  41,937
  47,634
  53,701
  60,131
  66,915
  74,048
  81,525
  89,343
  97,502
  105,505
  114,356
  123,562
  133,132
  143,078
  153,413
  164,154
  175,319
  186,926
  199,000
  211,563
  224,641
  238,262
  252,456
  267,254
  282,688
  298,795
  315,612
  333,176
  351,530
Operating income, $m
  5,954
  6,904
  7,922
  9,007
  10,156
  11,368
  12,643
  13,979
  15,376
  16,834
  18,854
  20,435
  22,080
  23,790
  25,568
  27,415
  29,334
  31,329
  33,403
  35,561
  37,806
  40,143
  42,577
  45,113
  47,758
  50,516
  53,394
  56,399
  59,538
  62,818
EBITDA, $m
  7,007
  8,039
  9,144
  10,321
  11,569
  12,885
  14,269
  15,719
  17,236
  18,819
  20,468
  22,185
  23,971
  25,828
  27,758
  29,763
  31,846
  34,012
  36,264
  38,607
  41,044
  43,581
  46,224
  48,977
  51,848
  54,842
  57,967
  61,230
  64,637
  68,198
Interest expense (income), $m
  16
  15
  1,313
  2,706
  4,198
  5,787
  7,471
  9,248
  11,116
  13,074
  15,122
  17,259
  19,486
  21,804
  24,215
  26,721
  29,326
  32,033
  34,846
  37,770
  40,810
  43,972
  47,263
  50,688
  54,256
  57,973
  61,849
  65,891
  70,110
  74,514
  79,114
Earnings before tax, $m
  5,939
  5,591
  5,217
  4,809
  4,369
  3,897
  3,395
  2,863
  2,302
  1,712
  1,595
  950
  277
  -424
  -1,154
  -1,912
  -2,699
  -3,517
  -4,367
  -5,250
  -6,167
  -7,120
  -8,111
  -9,142
  -10,215
  -11,333
  -12,497
  -13,710
  -14,976
  -16,297
Tax expense, $m
  1,604
  1,510
  1,409
  1,298
  1,180
  1,052
  917
  773
  621
  462
  431
  256
  75
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  4,336
  4,082
  3,808
  3,511
  3,189
  2,845
  2,478
  2,090
  1,680
  1,250
  1,164
  693
  202
  -424
  -1,154
  -1,912
  -2,699
  -3,517
  -4,367
  -5,250
  -6,167
  -7,120
  -8,111
  -9,142
  -10,215
  -11,333
  -12,497
  -13,710
  -14,976
  -16,297

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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 assets, $m
  26,281
  30,149
  34,294
  38,709
  43,387
  48,323
  53,513
  58,953
  64,641
  70,578
  76,764
  83,204
  89,903
  96,866
  104,102
  111,622
  119,437
  127,560
  136,006
  144,791
  153,931
  163,447
  173,357
  183,685
  194,451
  205,682
  217,401
  229,636
  242,416
  255,770
Adjusted assets (=assets-cash), $m
  26,281
  30,149
  34,294
  38,709
  43,387
  48,323
  53,513
  58,953
  64,641
  70,578
  76,764
  83,204
  89,903
  96,866
  104,102
  111,622
  119,437
  127,560
  136,006
  144,791
  153,931
  163,447
  173,357
  183,685
  194,451
  205,682
  217,401
  229,636
  242,416
  255,770
Revenue / Adjusted assets
  1.620
  1.620
  1.620
  1.620
  1.620
  1.620
  1.620
  1.620
  1.620
  1.620
  1.620
  1.620
  1.620
  1.620
  1.620
  1.620
  1.620
  1.620
  1.620
  1.620
  1.620
  1.620
  1.620
  1.620
  1.620
  1.620
  1.620
  1.620
  1.620
  1.620
Average production assets, $m
  3,704
  4,249
  4,833
  5,456
  6,115
  6,811
  7,542
  8,309
  9,111
  9,947
  10,819
  11,727
  12,671
  13,652
  14,672
  15,732
  16,833
  17,978
  19,169
  20,407
  21,695
  23,036
  24,433
  25,889
  27,406
  28,989
  30,640
  32,365
  34,166
  36,048
Working capital, $m
  -2,129
  -2,442
  -2,778
  -3,135
  -3,514
  -3,914
  -4,335
  -4,775
  -5,236
  -5,717
  -6,218
  -6,740
  -7,282
  -7,846
  -8,432
  -9,041
  -9,674
  -10,332
  -11,016
  -11,728
  -12,468
  -13,239
  -14,042
  -14,878
  -15,751
  -16,660
  -17,609
  -18,601
  -19,636
  -20,717
Total debt, $m
  2,211
  4,555
  7,067
  9,742
  12,577
  15,568
  18,713
  22,010
  25,457
  29,055
  32,804
  36,707
  40,766
  44,985
  49,371
  53,928
  58,664
  63,586
  68,704
  74,028
  79,567
  85,333
  91,339
  97,598
  104,122
  110,928
  118,030
  125,444
  133,189
  141,281
Total liabilities, $m
  15,926
  18,270
  20,782
  23,457
  26,292
  29,284
  32,429
  35,725
  39,173
  42,770
  46,519
  50,422
  54,481
  58,701
  63,086
  67,643
  72,379
  77,301
  82,420
  87,743
  93,282
  99,049
  105,055
  111,313
  117,838
  124,643
  131,745
  139,160
  146,904
  154,997
Total equity, $m
  10,355
  11,879
  13,512
  15,251
  17,094
  19,039
  21,084
  23,227
  25,469
  27,808
  30,245
  32,783
  35,422
  38,165
  41,016
  43,979
  47,058
  50,259
  53,586
  57,047
  60,649
  64,398
  68,303
  72,372
  76,614
  81,039
  85,656
  90,477
  95,512
  100,773
Total liabilities and equity, $m
  26,281
  30,149
  34,294
  38,708
  43,386
  48,323
  53,513
  58,952
  64,642
  70,578
  76,764
  83,205
  89,903
  96,866
  104,102
  111,622
  119,437
  127,560
  136,006
  144,790
  153,931
  163,447
  173,358
  183,685
  194,452
  205,682
  217,401
  229,637
  242,416
  255,770
Debt-to-equity ratio
  0.210
  0.380
  0.520
  0.640
  0.740
  0.820
  0.890
  0.950
  1.000
  1.040
  1.080
  1.120
  1.150
  1.180
  1.200
  1.230
  1.250
  1.270
  1.280
  1.300
  1.310
  1.330
  1.340
  1.350
  1.360
  1.370
  1.380
  1.390
  1.390
  1.400
Adjusted equity ratio
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  4,336
  4,082
  3,808
  3,511
  3,189
  2,845
  2,478
  2,090
  1,680
  1,250
  1,164
  693
  202
  -424
  -1,154
  -1,912
  -2,699
  -3,517
  -4,367
  -5,250
  -6,167
  -7,120
  -8,111
  -9,142
  -10,215
  -11,333
  -12,497
  -13,710
  -14,976
  -16,297
Depreciation, amort., depletion, $m
  1,053
  1,134
  1,222
  1,315
  1,413
  1,517
  1,626
  1,740
  1,860
  1,985
  1,615
  1,750
  1,891
  2,038
  2,190
  2,348
  2,512
  2,683
  2,861
  3,046
  3,238
  3,438
  3,647
  3,864
  4,090
  4,327
  4,573
  4,831
  5,099
  5,380
Funds from operations, $m
  5,389
  5,216
  5,030
  4,825
  4,602
  4,362
  4,104
  3,830
  3,540
  3,235
  2,779
  2,443
  2,093
  1,613
  1,036
  437
  -187
  -834
  -1,506
  -2,204
  -2,929
  -3,682
  -4,464
  -5,278
  -6,125
  -7,006
  -7,924
  -8,880
  -9,877
  -10,916
Change in working capital, $m
  -290
  -313
  -336
  -358
  -379
  -400
  -420
  -441
  -461
  -481
  -501
  -522
  -543
  -564
  -586
  -609
  -633
  -658
  -684
  -712
  -740
  -771
  -803
  -837
  -872
  -910
  -949
  -991
  -1,035
  -1,082
Cash from operations, $m
  5,679
  5,529
  5,366
  5,183
  4,981
  4,762
  4,525
  4,271
  4,001
  3,716
  3,280
  2,965
  2,636
  2,177
  1,622
  1,046
  446
  -176
  -822
  -1,492
  -2,188
  -2,911
  -3,662
  -4,442
  -5,253
  -6,096
  -6,975
  -7,889
  -8,841
  -9,835
Maintenance CAPEX, $m
  -478
  -553
  -634
  -721
  -814
  -913
  -1,017
  -1,126
  -1,240
  -1,360
  -1,485
  -1,615
  -1,750
  -1,891
  -2,038
  -2,190
  -2,348
  -2,512
  -2,683
  -2,861
  -3,046
  -3,238
  -3,438
  -3,647
  -3,864
  -4,090
  -4,327
  -4,573
  -4,831
  -5,099
New CAPEX, $m
  -502
  -545
  -584
  -622
  -659
  -696
  -731
  -767
  -802
  -837
  -872
  -908
  -944
  -981
  -1,020
  -1,060
  -1,101
  -1,145
  -1,190
  -1,238
  -1,288
  -1,341
  -1,397
  -1,456
  -1,517
  -1,583
  -1,652
  -1,724
  -1,801
  -1,882
Cash from investing activities, $m
  -980
  -1,098
  -1,218
  -1,343
  -1,473
  -1,609
  -1,748
  -1,893
  -2,042
  -2,197
  -2,357
  -2,523
  -2,694
  -2,872
  -3,058
  -3,250
  -3,449
  -3,657
  -3,873
  -4,099
  -4,334
  -4,579
  -4,835
  -5,103
  -5,381
  -5,673
  -5,979
  -6,297
  -6,632
  -6,981
Free cash flow, $m
  4,699
  4,431
  4,147
  3,839
  3,508
  3,153
  2,777
  2,379
  1,959
  1,519
  924
  443
  -59
  -695
  -1,435
  -2,204
  -3,003
  -3,833
  -4,695
  -5,591
  -6,522
  -7,490
  -8,497
  -9,544
  -10,634
  -11,770
  -12,953
  -14,186
  -15,473
  -16,816
Issuance/(repayment) of debt, $m
  2,186
  2,344
  2,512
  2,675
  2,835
  2,991
  3,145
  3,297
  3,447
  3,598
  3,749
  3,903
  4,059
  4,220
  4,385
  4,557
  4,736
  4,923
  5,118
  5,323
  5,539
  5,766
  6,006
  6,258
  6,525
  6,806
  7,102
  7,415
  7,745
  8,092
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  53
  561
  1,089
  1,273
  1,844
  2,437
  3,168
  4,005
  4,874
  5,778
  6,718
  7,694
  8,711
  9,768
  10,869
  12,016
  13,211
  14,457
  15,757
  17,114
  18,531
  20,011
  21,558
Cash from financing (excl. dividends), $m  
  2,186
  2,344
  2,512
  2,675
  2,835
  2,991
  3,145
  3,350
  4,008
  4,687
  5,022
  5,747
  6,496
  7,388
  8,390
  9,431
  10,514
  11,641
  12,812
  14,034
  15,307
  16,635
  18,022
  19,469
  20,982
  22,563
  24,216
  25,946
  27,756
  29,650
Total cash flow (excl. dividends), $m
  6,885
  6,776
  6,659
  6,514
  6,343
  6,145
  5,922
  5,729
  5,967
  6,206
  5,946
  6,189
  6,438
  6,692
  6,955
  7,227
  7,511
  7,807
  8,117
  8,443
  8,785
  9,145
  9,525
  9,925
  10,348
  10,793
  11,263
  11,759
  12,283
  12,834
Retained Cash Flow (-), $m
  -1,405
  -1,524
  -1,633
  -1,739
  -1,843
  -1,945
  -2,045
  -2,143
  -2,241
  -2,339
  -2,438
  -2,537
  -2,639
  -3,168
  -4,005
  -4,874
  -5,778
  -6,718
  -7,694
  -8,711
  -9,768
  -10,869
  -12,016
  -13,211
  -14,457
  -15,757
  -17,114
  -18,531
  -20,011
  -21,558
Prev. year cash balance distribution, $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 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
  5,480
  5,251
  5,026
  4,775
  4,499
  4,200
  3,877
  3,585
  3,726
  3,867
  3,508
  3,652
  3,798
  3,524
  2,950
  2,353
  1,733
  1,089
  423
  -268
  -983
  -1,724
  -2,491
  -3,286
  -4,110
  -4,964
  -5,851
  -6,772
  -7,729
  -8,724
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
  5,254
  4,808
  4,374
  3,932
  3,488
  3,048
  2,619
  2,241
  2,140
  2,027
  1,666
  1,558
  1,444
  1,183
  866
  598
  377
  201
  65
  -34
  -102
  -143
  -163
  -167
  -160
  -145
  -126
  -105
  -84
  -66
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  99.7
  99.3
  98.9
  98.3
  97.5
  96.7
  95.7
  94.5
  93.3
  92.0
  90.6
  89.2
  87.7
  86.1
  84.5
  82.9
  81.3
  79.7
  78.0
  76.4
  74.7
  73.1

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 28.7
Price to Sales 2.7
Price to Book 11.1
Price to Tangible Book
Price to Cash Flow 19.9
Price to Free Cash Flow 22.2
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 290
Management Effectiveness
Return On Assets 16%
Ret/ On Assets - 3 Yr. Avg. 18.1%
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 14.8%
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 $36765.478 million for the last fiscal year's total revenue generated by Accenture Cl A. The default revenue input number comes from 0001 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 15.8% 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 86.2%.

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 59.4% 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 8.7%.

Life of production assets of 6.7 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 - $8949.477 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 640.748 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 $99.7 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]

RELATED COMPANIES Price Int.Val. Rating
IBM International 119.90 191.80  buy
CTSH Cognizant Tech 67.77 59.23  sell
WIT Wipro ADR 5.19 143.25  str.buy
XRX Xerox 24.45 24.99  hold
HPE Hewlett Packar 14.22 72.67  str.buy
HPQ HP 22.01 36.87  str.buy

COMPANY NEWS

▶ Accenture Falls 3%   [01:54PM  Investing.com]
▶ [$$] Accenture Interactive to Acquire Ad-Tech Firm Adaptly   [Dec-12-18 07:21PM  The Wall Street Journal]
▶ [$$] Accenture Interactive to Acquire Ad-Tech Firm Adaptly   [11:37AM  The Wall Street Journal]
▶ Should You Buy Accenture Plc (ACN)?   [12:48PM  Insider Monkey]
▶ When Should You Buy Accenture plc (NYSE:ACN)?   [Dec-09-18 08:11AM  Simply Wall St.]
▶ Accenture Falls 3%   [Dec-06-18 12:38PM  Investing.com]
▶ This Firm Thrives By Hiring Top Tech Talent In Eastern Europe   [12:27PM  Investor's Business Daily]
▶ Accenture Acquires Enaxis Consulting   [Dec-03-18 07:00PM  Rigzone.com]
▶ Russian hackers use Brexit in phishing email, experts warn   [Nov-30-18 12:00PM  Associated Press]
▶ Does Accenture plcs (NYSE:ACN) CEO Pay Reflect Performance?   [Nov-23-18 07:16AM  Simply Wall St.]
▶ Accenture Rises 3%   [Oct-31-18 05:18PM  Investing.com]
▶ 3 Big Tech Stocks to Short   [Oct-30-18 11:48AM  InvestorPlace]

CONTACT US       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2018. All rigths reserved.