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Module 3: A ccenture. Kevin Overholt January 27 th , 2014. Background Information. Accenture is an information technology firm specializing in consulting, technology and systems integration, and outsourcing services. Spinoff of Arthur Andersen’s consulting branch.
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Module 3: Accenture Kevin Overholt January 27th, 2014
Background Information • Accenture is an information technology firm specializing in consulting, technology and systems integration, and outsourcing services. • Spinoff of Arthur Andersen’s consulting branch. • Current Stock Price: 81.18 • Shares Outstanding: 636.99MM • Market Cap: 51.71B • P/E Ratio: 17.29 • Net Income: 3.28B • Total Assets: 16.9B
NEA Multiple • Pros: • None • Cons: • Negative NEA alters multiple • Doesn’t reflect true value (Shares trading at 81.18)
NEA Multiple • Pros: • None • Cons: • Negative NEA alters multiple • Doesn’t reflect true value (Shares trading at 81.18)
BV Multiple • Pros: • Shows market cap in relation to • industry premium • Cons: • High growth in tech field makes this valuation difficult • Large variation in industry multiples (Shares trading at 81.18)
BV Multiple • Pros: • Shows market cap in relation to • industry premium • Cons: • High growth in tech field makes this valuation difficult • Large variation in industry multiples (Shares trading at 81.18)
Enterprise Profit After Tax (EPAT) Multiple • Pros: • Similar EPAT multiples across industry • Cons: • Different sized companies • Different core business (Shares trading at 81.18)
Enterprise Profit After Tax (EPAT) Multiple • Pros: • Similar EPAT multiples across industry • Cons: • Different sized companies • Different core business (Shares trading at 81.18)
Enterprise Profit After Tax (EPAT) Multiple - Adjusted • Pros: • Adjustment for size/core business makes valuation more accurate • Cons: • Not enough market data (Shares trading at 81.18)
NI Multiple • Pros: • Similar NI multiples across industry • Consistent EPS across industry • Cons: • Different core business (Shares trading at 81.18)
NI Multiple • Pros: • Similar NI multiples across industry • Consistent EPS across industry • Cons: • Different core business (Shares trading at 81.18)
Comprehensive Income Multiple • Pros: • Shows more insight towards income of the industry • Cons: • Doesn’t reflect core business • Differences in CI activities (Shares trading at 81.18)
Comprehensive Income Multiple • Pros: • Shows more insight towards income of the industry • Cons: • Doesn’t reflect core business • Differences in CI activities (Shares trading at 81.18)
Sales Multiple • Pros: • Sales is main focus of industry • Cons: • Multiples aren’t consistent • Different sources of revenue in industry (Shares trading at 81.18)
Sales Multiple • Pros: • Sales is main focus of industry • Cons: • Multiples aren’t consistent • Different sources of revenue in industry (Shares trading at 81.18)
(P-BV)/R&D Multiple • Pros: • R&D is crucial for all firms in this industry • Good signal of health and financial strength • Cons: • Large variation in amount spent on R&D (Shares trading at 81.18)
(P-BV)/R&D Multiple • Pros: • R&D is crucial for all firms in this industry • Good signal of health and financial strength • Cons: • Large variation in amount spent on R&D (Shares trading at 81.18)
Summary • NI Multiple and (P-BV)/R&D Multiple were the two multiples that, in theory, are most accurate. • Industry is vastly different, with each company focusing on different core strengths. • Multiples were consistently erratic and inconsistent with current price.
Recommendation • Sell! • The current price consistently is larger than the market multiples indicate it should be. • Research and Development figures are not in line with the rest of the industry. • Negative NEA is troubling.
