The company's upcoming results, which will be released on June 20, could reverse the current selloff, which was driven by past results. These have sent the company lower and lower despite the fact that its digital services business is perfectly healthy. How is one of the largest consulting and outsourcing companies in the market currently doing?

The Dublin-based company has written down a substantial portion of its value over the past few months. In fact, the quarterly results released on March 21 did not please investors much. While earnings per share managed to beat the market consensus, sales fell short by 0.3%. The company mainly lowered its outlook for this year. This was the main reason for the decline.

Another important factor was also that the company has been cutting profit margins for two consecutive years. They were only 10.72% last year compared to, for example, 11.69% in 2021. Implementing AI into its processes and programs is a given, but it requires a lot of effort and a significant investment. Whether the company will be able to overcome this downturn and what the prospects are for the next few years are discussed in this analysis.

Management

Julie Spellman Sweet - CEO

Julie Sweet is chairman and CEO of Accenture. She became CEO in September 2019 and will assume her next role as chairman in September 2021.

Previously, she served as CEO of Accenture's North America business, the company's largest geographic market. Prior to that, she was General Counsel, Secretary and Chief Compliance Officer for five years.

Prior to joining Accenture in 2010, Julie was a partner at Cravath, Swaine & Moore LLP for 10 years. Ms. Sweet is a member of the Board of Directors of the World Economic Forum. In addition, Julie is Chair of the Catalyst Board of Directors and serves on the Board of Directors of the Center for Strategic and International Studies and the Marriott Foundation for People with Disabilities - Bridges from School to Work.

Julie Sweet received her Bachelor of Arts degree from Claremont McKenna College and her Juris Doctorate from Columbia Law School. She has been recognized as one of Fortune's Most Powerful Women in Business and by Forbes magazine as one of the 100 Most Powerful Women in the World.

If you would like to learn more about Julia herself, you can check out her personal Linkedinwhere she regularly posts about what's going on at $ACN and has detailed her educational and professional career.

Industry/Specialty

Digital Technology: Accenture is a leader in delivering digital technology services that include artificial intelligence (AI), data analytics, cloud computing and the Internet of Things (IoT). These technologies help clients improve operational efficiency, analyze and leverage data for better decision-making and transform their businesses digitally.

TechnologyA: In technology, Accenture provides services including software development and maintenance, systems integration and IT infrastructure management. These services cover the entire software lifecycle from development and testing to implementation and maintenance.

Operations: $ACN offers comprehensive business process management and outsourcing services, enabling clients to increase efficiency and reduce costs. Specialties include Business Process Outsourcing (BPO), where Accenture takes over and manages various business processes such as customer service, accounting and HR.

Cybersecurity: The company provides comprehensive cybersecurity services that include security analysis, data protection and security incident response. This specialization helps organizations identify and minimize security risks, protect sensitive information, and respond quickly and effectively to security threats.

Green Technology and Sustainability: The firm focuses on helping clients implement sustainable technologies and solutions that minimize negative environmental impacts. This specialty includes consulting on energy efficiency, developing and deploying green technologies, and creating corporate social responsibility (CSR) strategies.

Corporate profitability and cash

So far this year, $ACN is in the red. This is mainly due to the latest quarterly results that we announced in the introduction. The stock is down 24.25% year-to-date since their announcement and still doesn't seem to have found a bottom. You can already get one share for under $290.

The company's current market capitalization is $181.33 billion. This is a value where the company has often hovered in recent years. The price per share is now 44.61% away from its highest valuation. Therefore, if it were to get to the same value as in 2021, the company's value could be well above $250 billion. The company now employs 733,000 people.

Only 0.26% of all $ACNshares are now privately held . The remaining 627.12 million shares are split among investors in the market. The company's debt is a negligible $3 billion and $160 million. Management is holding $5.13 billion in cash, so debt this company doesn't really have to deal with.

In 2019, the company's revenue was $43.22 billion. The operating margins were 11.06% and so the net profit was $4.78 billion. A year later, revenue increased to $44.33 billion and margins jumped to 11.52%. For 2020,$ACN earned $5.11 billion. The growth year 2021 brought in $50.53 billion in revenue. Profit margin was 11.69%. Net income was 5.91%. In 2022, the company enjoyed high revenue growth. Revenue was actually $61.59 billion. However, the margins decreased to 11.17%. But due to higher revenues, the net profit grew to $6.88 billion. Last year, revenue picked up again. In 2023, revenue was a record $64.11 billion. But margins fell for the second straight year. Last year, they were 10.72%. Net income was down $10 million to $6.87 billion.

The company provides its services to companies around the world. But the largest percentage of revenue still comes from the United States. In 2023, it was 45% or $28.85 billion. Europe came in a close second, where the company made $20.64 billion, or 32.2%. North America (excluding the U.S.) added $1.45 billion, and Ireland added $641 million. Growth markets, as the company refers to India, for example, earned it $12.53 billion. That's 19.55% of revenue.

Earnings per share were $5.34 in 2016. It was 0.22% above analysts' estimates. The next year, their value moved to $5.91. The company then managed to beat estimates until 2019. In 2018 and 2019, EPS were $6.74 and $7.36, respectively. Growth slowed in 2020, when the covid pandemic broke out. Earnings per share only grew by 10 cents that year. It was also a year when the company missed estimates by 2.38%. But growth returned in 2021 along with higher demand. Earnings per share were $8.8. The next year, EPS got to $10.71 and last year it was already $11.67. So the growth continues and the Wall Street outlook is that it should continue. By 2027, earnings per share could get as high as $16.84.

A very similar trend has accompanied earnings since 2016. These in that year were $32.88 billion. This figure was 0.21% above the market consensus. In 2017, revenue rose to $34.85 billion. The company managed to stay above market estimates in the following year as well. Revenue was $39.57 billion. In 2019 and 2020, growth was first 0.03% and then 0.2% below consensus. It wasn't until 2021 that the company saw strong growth thanks to home offices and work from home. Revenue surpassed $50 billion and was $50.53 billion. This year, estimates were beaten by 0.11%. While revenue growth has continued over the last two years, the market has always counted on higher figures. In 2022, revenues were $61.59 billion. Last year, the value reached $64.11 billion. This trend should not change in the next few years either. By 2027, revenue could get as high as $87.55 billion.

Theoverall revenue of $ACN grew, but importantly, the company's individual segments all grew as well. Health programs grew from $6.18 billion in 2017 to $12.56 billion last year. Financial services moved from $7.39 billion to $12.13 billion over the same time period. Communications grew from $6.88 billion to $11.45 billion. The largest segment, other services, more than doubled. In 2017 they were $9.5 billion and by 2023 they were $19.1 billion. All segments should continue to show at least similar growth.

Operating expenses

The company needed $5 billion for one quarter in 2010. But over time, its costs have been increasing. By 2011, quarterly expenses had increased to $6.25 billion and by 2014 they were above $7 billion. As sales grew, the company began to spend more and more on development and investment. As a result, costs continued to rise. In 2020, for one quarter, management was able to spend $9.27 billion. Over the next two years, costs grew at the fastest rate in history. In 2022, revenues were at $13.5 billion. Costs have held at that level to this day. The company even managed to reduce them slightly at the end of 2023.

Dividend

$ACN paid its first dividend in 2005. Shareholders back then earned 30 cents per year in a single payout. As recently as 2009, the dividend was paid only once a year, but the value has increased to 75 cents per share. In 2010, the company switched to two payouts a year. That lasted until 2020. Since the covid pandemic, the company has finally started paying dividends on a quarterly basis. The first payout so situated was at 80 cents per share. Currently, the company pays out $1.29 per share. This puts the annual dividend yield at 1.79% and counting.

Valuation/Comparison with peers

In 2010,$ACN'sP/E ratio was 13.27. It was also one of the few years in which the value of the ratio declined due to a decline in the stock price. Since then, the company has actually been increasing both share price and earnings per share. Thus, the P/E ratio has increased in proportion to these values. By 2021, the company's valuation had reached a P/E of 35.31. For the next 2 years, it declined along with the share price dropping to 23.99. EPS continued to rise. The current P/E ratio is 26.15 points.

Rivals

Infosys $INFY: is a global technology company based in India that provides a wide range of information technology and consulting services. The company was founded in 1981 by a group of seven engineers, including N.R. Narayan Murthy, who is one of the founders and a prominent figure in the Indian technology industry. Infosys has become one of the most prominent IT companies in the world due to its innovative solutions and quality services. The company provides various IT services including software development and maintenance, systems integration, IT infrastructure and management, and cloud services and migration. Their services cover the entire software application lifecycle from development to implementation to maintenance and support. Infosys helps companies optimize their IT environments and improve operational efficiency.

IBM $IBM: IBM is a New York-based global technology and consulting company founded in 1911. The company offers a wide range of IT services, including software development and maintenance, systems integration, IT infrastructure management, and cloud services and migration. IBM is known for its mainframe services that underpin many business-critical applications around the world. Consulting is a key part of IBM's offering. The company provides business and technology consulting, assistance with digital transformation, process optimization, and strategic planning and management. IBM also implements SAP and Oracle solutions, helping clients improve their business processes and increase efficiency.

Capgemini $CAP.PA: this company is a global leader in consulting, technology and digital transformation services based in Paris. The company was founded in 1967 by Serge Kampf and has since become one of the most prominent companies in its field. Capgemini employs approximately 350,000 people worldwide and provides a wide range of services and solutions. In IT services, Capgemini offers software development and maintenance, systems integration, IT infrastructure management and cloud services and migrations. These services help clients optimize their IT environments and increase operational efficiency. The company also provides comprehensive consulting services that include business and technology consulting, digital transformation, process optimization, strategic planning and management, and change management.

Blue - $ACN, Yellow - $CAP.PA, Orange - $INFY, Turquoise - $IBM

The entire online sector, not just consulting, has picked up rapidly since 2020. As a result, all of the companies in today's comparison have appreciated over the last 4 years and 5 months. Thebest performing stock is $INFY, which is up 97.3%. Then in second place is $CAP.PA. this stock is up 68%. $ACN is only third here with an appreciation of 36.31%. It has a very similar chart trend to the company in second place, but has been selling off faster in recent months. Then in last place with a gain of 16% is $IBM.

Future plans

Digital transformation and technology: Accenture plans to continue to expand its capabilities in digital technologies, including artificial intelligence (AI), machine learning (ML), blockchain, the Internet of Things (IoT) and cloud computing. The company is focused on providing solutions that help clients realize the full potential of digital transformation, automate processes and improve decision-making through data analytics.

Sustainability and Green Technology: $ACN intends to increase its investments in sustainable technologies and solutions that help clients achieve their environmental goals. The company is committed to supporting initiatives to reduce its carbon footprint, improve energy efficiency, and advance the circular economy. In this regard, Accenture strives to be not only an advisor but also a leader in implementing sustainable practices.

Cybersecurity: With the growing number of cyber threats, security in this area is one of the top priorities for more than just the firm. The company plans to expand its security services and offerings to help clients protect their sensitive data and systems from increasingly sophisticated attacks. Accenture is focused on developing advanced security solutions that incorporate predictive analytics and reactive measures to quickly manage incidents.

Investing in innovation and research: Accenture plans to continue to invest heavily in research and development to stay on the cutting edge of technology innovation. The company has its own research labs and innovation centres where it focuses on developing new technologies and solutions.

Global expansion and strategic acquisitions: the company plans to continue its global expansion and strengthen its presence in key markets around the world. $ACN is focused on strategic acquisitions that will enable it to expand its capabilities and offerings. This ensures that it can provide comprehensive and integrated solutions to its clients regardless of their geographic location.

Outlook

Despite the company's shares continuing to be above their fair value (down 1.7%) after a significant decline in recent months, its business and business model remains strong. Equally strong, perhaps stronger, are the prospects for both earnings per share and revenue in the years ahead. Digitisation and the rise of artificial intelligence are dominating the entire technology sector, the stock market and everything else. On top of strong results, solid profitability and really minimal debt, the company adds a dividend that is more than generous for such a large company. The stock is now trading at $288. That's a very small slice above their fair value. It's also important to note that since the absolute peak where the price per share was at the end of 2021, its value has declined 30.8% so far. So it was much higher than it is today. How are Wall Street analysts looking at developments in the year ahead?

Of the 29 analysts surveyed, 15 would buy the stock immediately. Their outlook is very positive and foresees a possible share price increase of up to 52% over the next 12 months. One share would thus sell on the market for $440. The other 3 analysts are also positive, but their outlook is already a bit lower. A 29.3% rise to a price of $372 would be enough for them. Another 10 analysts would do nothing with the stock now and just hold it. In the end, there was only one who would prefer to sell the stock. He fears a possible 4.65% decline. And how do you feel about this company? Do you have it in your portfolio?

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