Accenture
Plc
(ACN)
Analysts:
Chris Landqvist, Justin Pippitt,
Kelli Coldiron & Wei Pi
Macro
Economic
Outlook
Lagging, Coincident, Leading Indicators
Business Cycle Sectors
Current Portfolio Sector Weights
Company
Overview
Overview
*3 Key Services:
Global management consulting, technology services and
outsourcing company
*5 Operating Groups:
Communications and high tech, financial services, health
and public service, products, and resources
*236,000 employees in 54 countries
*Clients:
Fortune Global 500, Fortune
companies and governments
1000,
and
mid-size
*Generated net revenues of US$25.5 billion in 2011 fiscal year.
Revenues
Historical
Performance
Analysis
3-Year Compound Average Growth Rates
Per Share Metrics
Per Share Metrics
Earnings
Dividends
NOPAT
Free Cash Flow
2007
2008
2009
2010
2011
2.06
0.42
2.74
2.31
2.77
0.50
3.51
2.62
2.55
0.75
3.28
2.82
2.79
0.83
3.24
2.80
3.53
1.13
3.99
2.35
Cumulative Stock Returns vs. Market
ACN
30%
20%
10%
0%
-10%
-20%
^SPX
Total Revenue and Net Income
Total Revenue
Net Income
$30,000
$25,000
$20,000
$15,000
$10,000
$5,000
$0
2006
2007
2008
2009
2010
2011
Total Revenue and Net Income
Total Revenue
Net Income
$30,000
$25,000
$20,000
$15,000
$10,000
$5,000
$0
2006
2007
2008
2009
2010
2011
Total Revenue and Net Income
Total Revenue
Net Income
$30,000
$25,000
$20,000
$15,000
$10,000
$5,000
$0
2006
2007
2008
2009
2010
2011
Operating Profit
EBITDA
EBIT
$4,500
$4,000
$3,500
$3,000
$2,500
$2,000
$1,500
$1,000
$500
$0
2006
2007
2008
2009
2010
2011
Earnings Per Share and Dividends Per Share
Estimated and Actual Earnings Per Share
Estimated
Range
Actual
Earnings
Gross and Operating Profit Margin
Gross and
Operating Margin
Gross Profit Margin Operating Profit Margin
30%
25%
20%
15%
10%
5%
0%
2006
2007
2008
2009
2010
2011
Net and Free Cash Flow Margin
Net Profit Margin
Free Cash Flow Margin
16%
14%
12%
10%
8%
6%
4%
2%
0%
2006
2007
2008
2009
2010
2011
Earnings and Dividend Yield
Earnings Yield
Dividend Yield
12%
10%
8%
6%
4%
2%
0%
2006
2007
2008
2009
2010
2011
Total Debt to Assets, Long-Term Debt to Equity
Total Debt to Assets
Long-Term Debt to Equity
1%
1%
1%
1%
0%
0%
0%
2006
2007
2008
2009
2010
2011
Return on Assets, Equity and Capital
ROA
ROE
ROIC
60%
50%
40%
30%
20%
10%
0%
2006
2007
2008
2009
2010
2011
ROIC/WACC Spread
35.3%
Spread
WACC
Economic and Market Value Added
Porter’s 5
Forces
Porter’s – Supplier Power
SP
• Numerous suppliers
• Price sensitivity is high
• Similarity in products
• Low
Porter’s – Buyer Power
SP
BP
• Numerous suppliers
• Price sensitivity is high
• Similarity in products
• Low
• Excess demand
• High switching costs
• Brand name
• Low
Porter’s – Competitive Rivalry
SP
BP
CR
• Numerous suppliers
• Price sensitivity is high
• Similarity in products
• Low
• Excess demand
• High switching costs
• Brand name
• Low
• Numerous competitors
• Other strong brands
• Specialized local competitors
• High
Porter’s – Threat of Substitutes
SP
BP
CR
TS
• Numerous suppliers
• Price sensitivity is high
• Similarity in products
• Low
• Excess demand
• High switching costs
• Brand name
• Low
• Numerous competitors
• Other strong brands
• Specialized local competitors
• High
• Lack of uniqueness
• Competition more vertical integration
• High
Porter’s – Threat of New Entrants
SP
BP
CR
TS
NE
• Numerous suppliers
• Price sensitivity is high
• Similarity in products
• Low
• Excess demand
• High switching costs
• Brand name
• Low
• Numerous competitors
• Other strong brands
• Specialized local competitors
• High
• Lack of uniqueness
• Competition more vertical integration
• High
• Fairly cheap
• Less regulation
• Nature of technology
• Medium
SWOT
SWOT - Strengths
S
•
•
•
•
New contract structure
Increased need from US/EURO
No debt
Internal software solution
SWOT – Weaknesses
S
W
•
•
•
•
New contract structure
Increased need from US/EURO
No debt
Internal software solution
• Foreign exchange loss
• Domiciled in Ireland
• Limited ability to protect Intellectual rights
SWOT - Opportunities
S
W
O
•
•
•
•
New contract structure
Increased need from US/EURO
No debt
Internal software solution
• Foreign exchange loss
• Domiciled in Ireland
• Limited ability to protect Intellectual rights
• Growth in emerging markets
• Increased demand for out-sourcing
• Global footprint satisfies demand for increased
efficiency
SWOT - Threats
S
W
O
T
•
•
•
•
New contract structure
Increased need from US/EURO
No debt
Internal software solution
• Foreign exchange loss
• Domiciled in Ireland
• Limited ability to protect Intellectual rights
• Growth in emerging markets
• Increased demand for out-sourcing
• Global footprint satisfies demand for increased
efficiency
• Qualified workers
• Decreased government spending
• SAP starts competing same market segment
Strategic Position Summary
* ACN competes in the IT sector alongside several other strong
players.
*Clients will pay a premium for working with brand name company
with a global footprint.
*The nature of technology is volatile but requires low initial capital
investment and faces limited government/industry regulation or
policies.
*ACN is well positioned to quickly adhere to the needs of their
clients worldwide through proprietary software.
*Hiring a skilled workforce is becoming increasingly difficult.With no
debt, ACN is well positioned for M&A activity to acquire new talent
or technology.
Forecasts
Income Statement Forecasts
Income Statement Forecast Graphs
Revenue Growth
Dividend Growth
Unadjusted
Adjusted
Balance Sheet Forecasts
Balance Sheet Forecasts
Weighted Average Cost of Capital
Over (Under) Valuation Per Share
Dividend Discount and Relative Valuation Models
Intrinsic vs. Current Price
PRVit
Scores
PRVit Overall
PRVit Performance and Risk
PRVit vs. Industry and Market
PRVit Return on Capital vs. Cost of Capital
Investment
Thesis
Investment Thesis
Despite slow growth in Total Revenue, ACN has been able
to grow EBIT, NOPAT, and EPS during fierce economic
conditions. In conjunction with a ROIC to WACC spread of
35.3%, ACN is able to create value for their shareholders
while increasing their dividend on a sequential basis. ACN’s
global footprint is essential to take advantage of the
opportunities in growth markets. The increasing need for
improved efficiency in both the U.S. and Europe, currently in
a declining economic trend, further strengthens ACN’s
position. The negative currency exchange risk is a concern,
which partially explains the conservative forecast
assumptions for this fundamentally robust corporation. Due
to its historical performance, commitment to dividends and
low valuation we recommend to BUY ACN.
Questions