DXC - Accenture: The Pessimism May Be A Little Overdone

2024-05-07 01:47:08 ET

Summary

• Accenture is a global IT services company with over 721,000 employees, serving clients in more than 120 countries.
• The company's strong position in the AI technology race and its loyal client base will benefit from the increasing demand for AI solutions.
• Accenture's revenue growth has held up better than its competitors, and its book-to-bill ratio remains strong, indicating future growth potential.
• The stock price  pullback may be overdone, as the weaker than expected growth is in part due to clients shifting their budgets from shorter-term discretionary spend into longer-term transformational projects that will take longer to translate into revenues.
• At a free cash flow yield of 4.6%, Accenture is trading at a decent valuation, but not at a deep discount.  Potentially attractive for long-term oriented investors.

Overview

Accenture ( ACN ) is a leading global professional IT services company that helps the world’s leading businesses, governments and other organizations build their digital core, optimize their operations, accelerate revenue growth, and enhance citizen services — creating tangible value at speed and scale. They are an innovative company consisting of over 721,000 talented people serving clients in more than 120 countries. (Adapted from Accenture’s 2022 annual report)

Accenture serves more than 9,000 clients — including 89 of the Fortune Global 100 and more than three quarters of the Fortune Global 500 — spanning the full range of industries around the world. Ninety nine of the company’s top 100 clients have partnered with Accenture for more than 10 years.

Accenture is the largest amongst its closest competitors at three times the revenues of Cognizant Technologies ( CTSH ) (figure 1, green line) and IBM’s ( IBM ) Consulting Services segment (brown line). Oracle’s ( ORCL ) Cloud Service Support segment (gray line), while smaller, includes the company’s software as a service platforms and is not an apples-to-apples comparison, while Booz Allen Hamilton ( BAH ) focuses primarily on government consulting contracts....

For further details see: