Accenture PLC (ACN, Financial) recently reported a daily loss of 1.54%, contributing to a three-month decline of 17.59%. Despite these figures, the company boasts a robust Earnings Per Share (EPS) of 11.03. This analysis aims to determine if the stock is modestly undervalued, as suggested by the GF Value of $339.99, a proprietary measure indicating the stock's intrinsic value.
Company Overview
Accenture PLC, a leading global IT services firm, specializes in consulting, strategy, technology, and operational services. These offerings span various sectors such as communications, media, technology, financial services, and health, supporting enterprises through digital transformations and more. With nearly 500,000 employees across 200 cities in 51 countries, Accenture's expansive reach underscores its pivotal role in the IT industry. Currently, the stock trades at $303.26, with a market cap of $190.70 billion, positioning it below the GF Value and suggesting potential undervaluation.
Understanding GF Value
The GF Value is calculated considering historical trading multiples, a GuruFocus adjustment factor based on past returns and growth, and future business performance estimates. This value suggests a fair trading price for the stock. If Accenture PLC's stock price significantly deviates from this line, it indicates potential overvaluation or undervaluation. Currently, Accenture PLC's trading price is below this value, indicating it might be undervalued, which could lead to higher future returns relative to its business growth.
Financial Strength and Stability
Investing in a company with solid financial strength reduces the risk of loss. Accenture PLC's cash-to-debt ratio stands at 1.62, although this is lower than 56.89% of its industry peers. Despite this, the company's overall financial strength is rated 9 out of 10 by GuruFocus, indicating a strong financial position.
Profitability and Growth Prospects
Accenture PLC has maintained profitability over the past decade, with an operating margin of 13.76%, which is higher than 80.29% of companies in the Software industry. The company's average annual revenue growth rate is 13.6%, showcasing its ability to consistently expand and generate value.
Comparative Analysis of ROIC and WACC
An effective way to evaluate a company's profitability is by comparing its Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC). Accenture's ROIC is 20.22%, significantly higher than its WACC of 10.53%, indicating efficient value creation for shareholders.
Conclusion
Accenture PLC (ACN, Financial) appears modestly undervalued based on its GF Value, strong financial condition, and solid profitability. This assessment suggests a promising outlook for potential investors. For more detailed financial insights about Accenture PLC, visit the 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
