Over the past six months, Accenture’s stock price fell to $178.52. Shareholders have lost 14.7% of their capital, which is disappointing considering the S&P 500 has climbed by 13.6%. This was partly driven by its softer quarterly results and might have investors contemplating their next move.
Following the drawdown, is now a good time to buy ACN? Find out in our full research report, it’s free.
Why Does ACN Stock Spark Debate?
With a workforce of approximately 774,000 people serving clients in more than 120 countries, Accenture (NYSE: ACN) is a professional services firm that helps organizations transform their businesses through consulting, technology, operations, and digital services.
Two Positive Attributes:
1. Long-Term Revenue Growth Shows Strong Momentum
A company’s long-term sales performance can indicate its overall quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, Accenture grew its sales at a solid 8.8% compounded annual growth rate. Its growth surpassed the average business services company and shows its offerings resonate with customers.
2. Economies of Scale Give It Negotiating Leverage with Suppliers
With $73.1 billion in revenue over the past 12 months, Accenture is a behemoth in the business services sector and benefits from economies of scale, giving it an edge in distribution. This also enables it to gain more leverage on its fixed costs than smaller competitors and the flexibility to offer lower prices.
One Reason to Be Careful:
New Investments Fail to Bear Fruit as ROIC Declines
We like to invest in businesses with high returns, but the trend in a company’s ROIC can also be an early indicator of future business quality.
Unfortunately, Accenture’s ROIC has decreased significantly over the last few years. Only time will tell if its new bets can bear fruit and potentially reverse the trend.
Final Judgment
Accenture’s merits more than compensate for its flaws. With the recent decline, the stock trades at 13× forward P/E (or $178.52 per share). Is now a good time to initiate a position? See for yourself in our comprehensive research report, it’s free.
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