Investing in Accenture

Accenture (ACN), is a global management and consulting company operating in more than 120 countries worldwide. The company also offers services in the implementation and development of technology and as a provider of business outsourcing. Accenture offers business solutions to the Fortune 100 listed companies, and three quarters of the Fortune 500. This includes large companies like Wal-Mart Stores, Inc (WMT), and British Petroleum (BP).

Accenture follows a similar business model to consulting groups like McKinsey & Co, and analyses the business model of its clients, assisting them in overcoming any challenges and issues that may arise from implementing their plans. As an outsourcing provider, it is able to provide specific business functions for companies that prefer not to perform the function in-house for whatever reason, saving the company money and making Accenture valuable to their success.

Preceding the start of the 2010 fiscal year, Accenture had gained approval to change its place of incorporation from Bermuda to Ireland. This was a strategic move, with the company aiming to benefit from a more stable economy and established tax-treaties between Ireland and the countries Accenture does business with.

Accenture is currently showing significant growth, and demand for the company’s services remains strong as businesses seek to streamline their business models to cope with the economy. There is also a high demand for Accenture’s services in technology, and companies like banks are looking to upgrade their systems to decrease costs and develop productivity. Compass (BBVA), is one such bank which has signed with Accenture to deliver financial software solutions.

One potential problem in Accenture’s business model may be its strong presence in markets such as Russia and South Korea. Accenture has one third of its current work force situated in these markets, compared to competitor International Business Machines (IBM), which places 18 per cent of its workforce in developing markets. This could end up either rewarding the company greatly or dragging them down, as they could suffer the effects of changing government regulations impacting the return they expect on their investment into these markets.

Accenture announced in its recent call that net revenues for the company had increased by 18 per cent in US dollars for the 2011 fiscal year at $25.5 billion. The company boasts a strong and stable balance sheet, with almost negligible debt and $5.7 billion in free cash flow, up from $4.8 billion in 2010. This growth stems from Accenture’s acquisition of Duck Creek Technologies and Zenta increasing their technological capabilities, and through continued demand for consultancy and management solutions from the company. Accenture is aiming for revenue of $28 – 31 billion for the 2012 fiscal year.

The stock price of Accenture has shown a growth of over 30 per cent in the past year, indicating the strength and continued development of the company. The company has a P/E ratio of 16.8 according to Forbes, and a pattern of growth showing that it may break its current point of $58.20.

Analysts are expecting Accenture to show continued growth in earnings over the next 5 years, at a rate of per cent annually.