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listed on the new york stock exchange, accenture (NYSE: ACN) is a global management consulting, technology servicing and outsourcing company having about 259,000 people serving clients across 120 countries.

with its headquarters in dublin (republic of ireland), it is one of the world’s largest consulting firm if measured by revenues and reported revenue of us$29.77 billion (2012)

 

ipo

accenture came out with initial public offering (ipo) on 19th july, 2001 at the price of $14.50 per share in nyse. accenture stock closed on the date at $15.17 per share with the days highest at $15.25 per share. it is remarkable to know that accenture raised nearly us$ 1.7 billion on the first day of the ipo.

 

financials proving Accenture

in the year 2007, accenture produced revenue of $ 19.69 billion and when compared to $ 29.78 billion in 2012 it showed a growth of about 8.63%. this increase in its revenue growth is also expected to sustain in future.

operating income was $1.05billion, an increase of 7% over the same period last year, and operating margin was 14.5 percent, a year-over-year expansion of more than 60 basis points.

however the most recent quarter revenue of us$ 7.22 billion close to market expectations of us$ 7.30 billion and with future projected revenue of us$ 47.00 billion due to its gaining popularity in software application and outsourcing professionals.

with so much of ups and downs, it still has an increase by 14% it remains a fair deal promising  its commitment towards stakeholders.

 

 

dividend

at present accenture pays out semi- annual dividends of $ 0.81 per share, which when calculated annually comes to 2.4%. with a stable 2%+ dividend it gives its investors an edge to carry them through any short term downs making it a low volatility and stable dividend giving company. the companys dividend when compared to its previous semi annual dividend has an increase of 13.5 cents per share or 20 percent, over the company’s previous semi-annual dividend, declared in march which means a profit and sustainability for the company.

 

low debt in the capital structure

accenture has an amount of about $0.019 million of debt in their financial statements currently which a sign of financial health for the company as it would reduce the financial risk and bankruptcy risk. accenture being underleveraged would not only be able to tackle sour economy situations but also would account for stocks that would make for better acquisitions.

the low existing debt exposure makes accenture more attractive amongst its lenders and investors who are confident with the company’s financials.

 

sizeable pile of cash

presently accenture holds about $5.68 billion cash in their balance sheets, a major advantage to the business. it may also be due to low interest outgo giving more cash in its hands which accenture can utilize at its own discretion. it would either invest in a viable business opportunity or distribute it amongst its shareholders in the form of dividends. either way, the investors stand to benefit.

 

competitive analysis 

<table> <tbody> <tr> <td> <p><strong>particulars</strong></p> </td> <td> <p><strong>acn</strong></p> </td> <td> <p><strong>ibm</strong></p> </td> <td> <p><strong>infy</strong></p> </td> <td> <p><strong>crm</strong></p> </td> </tr> <tr> <td> <p><strong>eps(ttm)</strong></p> </td> <td> <p><strong>3.61</strong></p> </td> <td> <p><strong>14.37</strong></p> </td> <td> <p><strong>3.05</strong></p> </td> <td> <p><strong>-1.82</strong></p> </td> </tr> <tr> <td> <p><strong>p/e(ttm)</strong></p> </td> <td> <p><strong>20.56</strong></p> </td> <td> <p><strong>13.99</strong></p> </td> <td> <p><strong>16.85</strong></p> </td> <td> <p><strong>n/a</strong></p> </td> </tr> <tr> <td> <p><strong>peg                     (5 yr expected)</strong></p> </td> <td> <p><strong>1.53</strong></p> </td> <td> <p><strong>1.21</strong></p> </td> <td> <p><strong>1.24</strong></p> </td> <td> <p><strong>4.20</strong></p> </td> </tr> <tr> <td> <p><strong>p/s(ttm)</strong></p> </td> <td> <p><strong>1.68</strong></p> </td> <td> <p><strong>2.14</strong></p> </td> <td> <p><strong>4.08</strong></p> </td> <td> <p><strong>8.70</strong></p> </td> </tr> </tbody> </table>

 

infosys (NYSE: INFY) being an consulting firm has its profit margin at 27 % which is a major worry for accenture which has its profit margin of 12%.

 

international business machines (NYSE: IBM) a technology consulting firm is expected to report earnings of $14.29 per share.

 

salesforce.com (NYSE: CRM) produced a 10.3% gain  with no profit and very high p/e ratio making money from its operations. though the company does not make much amount of profit but still they have a wide market opportunity to grab.

 

among the peer’s, accenture holds the major position in delivering values to their esteemed shareholders with better than expected p/e ratio and eps.

 

 

 

 

 

opportunities for global growth

the company has taken one major step to diversify and that is through acquisitions. it acquired avventa worldwide in october 2012 and also purchased iptv software assets from siemens (NYSE: SI). it also acquired news page which is a mobility software company that would provide it as an augment in its consumer goods and services business. it also made another acquisition of octagon research solutions to provide its pharmaceuticals clients an improved clinical service. further opportunities in acquisitions can intensify the companies growth and with net cash holding of $5.7 billion it can go for strong buyouts.

 

future revenue expectations

the company continues to expect operating cash flow to be in the range of $3.2 billion to 3.5 billion; property and equipment additions to be $420 million; and free cash flow to be in the range of $2.8 billion to $3.1 billion. it continues with its further expectations of return of at least $3.3 billion to its shareholders in fiscal 2013 through dividends and share repurchases and to keep its annual effective tax rate to be in the range of 26% to 27%. not only this but accenture keeps the capability to target new bookings for fiscal 2012 in the range of $31 billion to $34 billion.

 

conclusion

over the next 5 years, the analysis that follow this company are expecting it to grow earnings at an average annual rate of 13.3%.

the stock is expected to command a premium for some more time, as the company is expected to outperform its industry average (in terms of earning expansion). accenture has a strong act of drawing its existing and new clients that helps it to look in a fortified position in 2013.therefore for those people willing to manifold their portfolio, accenture sustains its position as a must buy.

Acccenture proves itself a seed to be bored to get fruitful returns.


ishitasaraogi has no position in any stocks mentioned. The Motley Fool recommends Accenture and Salesforce.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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