Accenture plc. (ACN) hit a 52-week high of $87.08 yesterday, before eventually closing at $86.00 and amassing a strong return over the past one year. Average volume of shares traded over the last three months stands at approximately 2,961k.
Accenture delivered two positive earnings surprises in the last four quarters with an average beat of 1.7%. This Zacks Rank #3 (Hold) company has a market cap of $54.50 billion with long-term earnings growth expectations of 10.3%.
Moreover, from a valuation perspective, the stock looks very attractive as it currently trades significantly lower than the industry average based on our forward earnings estimate, which indicates upward potential. Accenture currently trades at a forward P/E of 17.87x as against the industry group average of 21.10x.
The recent price appreciation can also be attributed to Accenture’s outsourcing solutions business, which has been driven by strength across most industries and geographies. This bodes well for the company as deal wins will translate into higher revenues.
In fact overall sales performance in the last-reported quarter (fourth-quarter of fiscal 2014) was rather good. Sales escalated 9.7% year over year to $7.78 million and there was momentum in new bookings. Moreover, the company continued to return value to shareholders.
Buoyed by better-than-expected revenues, the company provided an encouraging first quarter and fiscal 2015 top-line guidance. Accenture expects first quarter of fiscal 2015 revenues to range between $7.55 and $7.80 billion. The Zacks Consensus Estimate is pegged at $7.70 billion. Similarly, for fiscal 2015, revenues are expected to grow in the range of 4% to 7% in local currency.
Furthermore, Accenture is known for its shareholder-friendly moves. In the last-reported quarter, the company repurchased 8.2 million shares for $658 million. Moreover, the company increased semi-annual cash dividend by 10%. Share repurchases are a good way of returning cash to investors while at the same time boosting the company’s earnings.
Accenture also has a strong balance sheet. As of Aug 31, 2014, the company had cash and cash equivalents of $4.9 billion and long-term debt of just $26.4 million. This enables the company to look for strategic acquisitions and invest in growth initiatives.
However, Accenture continues to face competition from companies like Cognizant Technology Solutions (CTSH) and IBM (IBM). Additionally, a strained spending environment as well as significant exposure to Europe may temper growth to some extent.
As things stand now, we believe that the company remains well positioned to sustain its robust top line performance, helped by acquisitions and its offerings in Outsourcing and Consulting services.
Apart from Accenture, Symantec Corp. (SYMC) also hit a 52-week high of $26.39 on Dec 1.
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