- July 29, 2022
- Posted by: Ramkumar
- Category: Posts
Accenture Stellar Performance
But, first, the company had a blockbuster last twelve months in revenue growth as the company grew by 𝟐𝟒.𝟏% 𝐓𝐓𝐌 𝐚𝐠𝐚𝐢𝐧𝐬𝐭 𝐬𝐢𝐧𝐠𝐥𝐞-𝐝𝐢𝐠𝐢𝐭 𝐠𝐫𝐨𝐰𝐭𝐡 𝐭𝐡𝐚𝐭 𝐢𝐭 𝐫𝐞𝐩𝐨𝐫𝐭𝐞𝐝 𝐬𝐢𝐧𝐜𝐞 𝟐𝟎𝟏𝟖.
𝐓𝐡𝐞 𝐫𝐞𝐦𝐚𝐫𝐤𝐚𝐛𝐥𝐞 𝐚𝐬𝐩𝐞𝐜𝐭 𝐨𝐟 𝐀𝐜𝐜𝐞𝐧𝐭𝐮𝐫𝐞’𝐬 𝐠𝐫𝐨𝐰𝐭𝐡 𝐢𝐬 𝐭𝐡𝐚𝐭 𝐭𝐡𝐢𝐬 𝐠𝐫𝐨𝐰𝐭𝐡 𝐡𝐚𝐬 𝐧𝐨𝐭 𝐜𝐨𝐦𝐞 𝐚𝐭 𝐭𝐡𝐞 𝐞𝐱𝐩𝐞𝐧𝐬𝐞 𝐨𝐟 𝐚 𝐥𝐨𝐰𝐞𝐫 𝐦𝐚𝐫𝐠𝐢𝐧. 𝐓𝐡𝐢𝐬 𝐟𝐚𝐜𝐭𝐨𝐫 𝐢𝐧𝐝𝐢𝐜𝐚𝐭𝐞𝐬 𝐭𝐡𝐚𝐭 𝐭𝐡𝐞 𝐜𝐨𝐦𝐩𝐚𝐧𝐲 𝐡𝐚𝐬 𝐬𝐮𝐟𝐟𝐢𝐜𝐢𝐞𝐧𝐭 𝐩𝐫𝐢𝐜𝐢𝐧𝐠 𝐩𝐨𝐰𝐞𝐫 𝐭𝐨 𝐡𝐚𝐧𝐝𝐥𝐞 𝐢𝐧𝐟𝐥𝐚𝐭𝐢𝐨𝐧, 𝐚𝐭𝐭𝐫𝐢𝐭𝐢𝐨𝐧, 𝐚𝐧𝐝 𝐬𝐮𝐩𝐩𝐥𝐲 𝐜𝐨𝐧𝐬𝐭𝐫𝐚𝐢𝐧𝐭𝐬.
Further, the company has continued to invest in Capex and acquisitions and has returned the excess free cash flows to shareholders through dividends and buybacks, indicating an excellent investment and dividend strategy.
At present, the 𝐬𝐭𝐨𝐜𝐤 𝐢𝐬 𝐭𝐫𝐚𝐝𝐢𝐧𝐠 𝐚𝐭 $𝟑𝟐𝟕 𝐩𝐞𝐫 𝐬𝐡𝐚𝐫𝐞. When i analysed how much the market is paying for the growth against earnings power for Accenture shares, i derived the following:
At no growth, 𝐀𝐜𝐜𝐞𝐧𝐭𝐮𝐫𝐞 𝐭𝐫𝐚𝐝𝐞𝐬 𝐚𝐭 $𝟐𝟎𝟗/𝐬𝐡𝐚𝐫𝐞, 𝐢𝐦𝐩𝐥𝐲𝐢𝐧𝐠 𝐭𝐡𝐚𝐭 𝐭𝐡𝐞 𝐦𝐚𝐫𝐤𝐞𝐭 𝐢𝐬 𝐩𝐚𝐲𝐢𝐧𝐠 $𝟏𝟏𝟖 (𝐝𝐢𝐟𝐟𝐞𝐫𝐞𝐧𝐜𝐞 𝐛𝐞𝐭𝐰𝐞𝐞𝐧 𝐭𝐡𝐞 𝐜𝐮𝐫𝐫𝐞𝐧𝐭 𝐩𝐫𝐢𝐜𝐞 𝐚𝐧𝐝 $𝟐𝟎𝟗) 𝐟𝐨𝐫 𝐠𝐫𝐨𝐰𝐭𝐡. If i model the earnings, the market expects Accenture to grow at 15% CAGR for the next five years, which is phenomenal for a company of Accenture’s size.
Even though the TAM for the IT services market is expanding, if Accenture has to grow at 15% CAGR for the next five years, some of its growth has to come from taking the competitor’s market share.
Thus, for Indian IT companies, 𝐭𝐡𝐞 𝐩𝐨𝐬𝐢𝐭𝐢𝐯𝐞 𝐫𝐞𝐬𝐮𝐥𝐭𝐬 𝐟𝐫𝐨𝐦 𝐀𝐜𝐜𝐞𝐧𝐭𝐮𝐫𝐞 𝐬𝐢𝐠𝐧𝐢𝐟𝐲 𝐝𝐞𝐦𝐚𝐧𝐝 𝐢𝐧 𝐈𝐓 𝐬𝐞𝐫𝐯𝐢𝐜𝐞𝐬; 𝐢𝐭 𝐧𝐞𝐞𝐝𝐬 𝐭𝐨 𝐛𝐞 𝐜𝐚𝐮𝐭𝐢𝐨𝐮𝐬 𝐨𝐟 𝐧𝐨𝐭 𝐥𝐨𝐬𝐢𝐧𝐠 𝐢𝐭𝐬 𝐞𝐱𝐢𝐬𝐭𝐢𝐧𝐠 𝐦𝐚𝐫𝐤𝐞𝐭 𝐬𝐡𝐚𝐫𝐞 𝐭𝐨 𝐀𝐜𝐜𝐞𝐧𝐭𝐮𝐫𝐞.