Up 58% in 2021, is Accenture Stock Still a Good Buy?
Renowned professional services company Accenture (ACN) has recovered significantly from its pandemic lows thanks to its broad market reach and strategic partnerships. Although ACN’s shares gained more than 58% in...
Renowned professional services company Accenture (ACN) has recovered significantly from its pandemic lows thanks to its broad market reach and strategic partnerships. Although ACN’s shares gained more than 58% in price last year, considering the continuing rapid digitalization globally, is it worth owning the stock now? Let's discuss.
Accenture plc (ACN) is a global professional services company that specializes in digital, cloud, and security. Combining unmatched experience and specialized skills across more than 40 industries, the Dublin, Ireland-based company offers strategy and consulting, interactive, technology, and operations services.
The convergence of the latest technologies, such as 5G, cloud, and next-generation IoT, is revolutionizing how organizations operate across all industries. This has created new opportunities for innovative services and new sources of growth for ACN.
The company's shares have gained 41.3% in price over the past nine months and 22.2% over the past three months to close yesterday's trading session at $397.18. And given ANC’s massive market reach, there could still be plenty of upside to be had in the stock.
Here is what could shape ACN's performance in the near term:
Last month, ACN acquired Zestgroup, a services organization that specializes in energy transitions, net carbon-zero projects, and renewables procurement. Zestgroup combines extensive industry knowledge, project skills, and market regulatory experience to assist enterprises in transitioning to net-zero energy. These capabilities should strengthen ACN's ability to build more trustworthy, circular, and net-zero value chains, while creating social and economic benefits for all stakeholders.
Also last month, ACN announced its intention to acquire AFD.TECH, an independent network services firm that specializes in network engineering, operations, and business services. This acquisition would bring more than 1,600 highly skilled professionals to Accenture's global workforce and diverse expertise in engineering, design, implementation, and operation of next-generation networks, including 5G and fiber.
During its first fiscal quarter, ended November 30, 2021, ACN's total revenue increased 27.2% year-over-year to $14.97 billion. Its operating income increased 28.8% year-over-year to $2.43 billion. And the company's net income grew 19.4% from its year-ago value to $1.79 billion, while its EPS grew 19.9% from the prior-year quarter to $2.78.
ACN's 11.5% trailing-12-months net income margin is 80.2% higher than the 6.4% industry average. Also, its ROC, asset turnover ratio and ROA are 341.9%, 105.3%, and 292.3% higher than the respective industry averages. And its $7.9 billion in cash from operations is 6657.6% higher than the $116.95 million industry average.
Impressive Growth Prospects
The Street expects ACN's revenues and EPS to rise 18.7% and 20%, respectively, year-over-year to $53.21 billion and $9.36 in fiscal 2022. In addition, ACN's EPS is expected to rise at an 11.4% CAGR over the next five years. Also, the company has an impressive earnings surprise history; it topped the Street’s EPS estimates in two of the trailing four quarters.
Consensus Rating and Price Target Indicate Potential Upside
Of 16 Wall Street analysts that rated ACN, 11 rated it Buy, and five rated it Hold. The 12-month median price target of $437.69 indicates a 10.2% potential upside. The price targets range from a low of $397.00 to a high of $475.00.
POWR Ratings Reflect Solid Prospects
ACN has an overall B grade, which equates to a Buy rating in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. ACN has a B grade for Quality and Sentiment. ACN's solid earnings and revenue growth potential align with the quality grade. In addition, optimistic analyst estimates are in sync with the Sentiment grade.
Of 11 stocks in the A-rated Outsourcing – Tech Services industry, ACN is ranked #5.
Beyond what I stated above, we have graded ACN for Growth, Value, Stability, and Momentum. Get all ACN ratings here.
ACN's shares have climbed 9.9% in price over the past month, with the company emerging from pandemic blues thanks to significant digitization across various industries. In addition, the company's aggressive expansion in the cloud segment is expected to give it an edge over many of its competitors and drive its growth in the coming months. So, we think it could be a great bet now.
How Does Accenture Plc (ACN) Stack Up Against its Peers?
ACN has an overall grade of B in our proprietary rating system. This rating is superior to its industry peers, ServiceSource International Limited (SREV), Leidos Holdings Inc. (LDOS), and Nomura Research Institute Ltd. (NRILY), which have a C (Neutral) rating.
ACN shares fell $4.20 (-1.06%) in premarket trading Thursday. Year-to-date, ACN has declined -5.20%, versus a -1.35% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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