Accenture is one of the largest consulting companies in the world. They spun off from Arthur Anderson, the big accounting firm that went down in flames after the Enron scandal. Ever since their spinoff, they have been flourishing as a business.
They do everything from management consulting to technology and outsourcing services. They have offices in over 50 countries around the world. The official headquarters is in Dublin, Ireland, but they are really an international company.
They operate in five subsets. They have a communications and technology group that does consulting in that area. They also have a financial services segment, one for health and public service, and a segment for products and resources.
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They are not doing that bad as a company. Their revenues have grown at a rate of 8.46% in the past five years. Last year, their sales shot up by 18.44%. The net profit before taxes shot up by 20.51%. Revenues rose. It climbed from $23 billion to $27.35 billion. Earnings grew from $1.78 billion to $2.28 billion. Their net profit margins remained steady at around 12.8%.
Debt Levels are Manageable
They have a lot of debt for a business services company, but it has been improving. Accenture’s debt to equity ratio went from 3.53 to 3.06 last year. The average for business services is 2.6. This isn’t really too much of a concern because their interest coverage ratio is high at 269.35.
Return on Asset – Return on Equity
They are getting a health return on equity and assets. Their ROE is 58.72%. While it declined from 62.79% in the previous year, they are still well above the industry average of 16%. Their ROA is also high at 14.48%. This figure improved from 13.87% the year before. The industry average ROA is 8%.
Accenture has a 5 year EPS growth rate of 16.43%. This would technically qualify as a growth stock. Their current EPS is 3.77. They have a market cap of around $45 billion and a dividend yield of 2.13%. Their P/E ratio is 17, which is slightly above the S&P 500 average. I think they warrant a higher stock price and are an undervalued stock.
Remember that investing is a very risky activity. You can lose all or most of your initial investments. Consult a licensed financial advisor before implementing any investment strategy. Historical performance is no guarantee of future performance. No one can accurately predict the future, at least not consistently over time. The writer of this article and owner of this website do not own any of the stocks mentioned in this post.