What happened
Shares of consulting company Accenture (ACN 0.35%) took off like a rocket Thursday morning and are up 8.6% as of 10:35 a.m. ET.
Accenture reported huge beats on the top and bottom lines in its earnings report for the fiscal first quarter of 2022 this morning. Instead of the $12.6 billion in revenue that analysts had projected, Accenture took in $15 billion in the quarter. Instead of analysts' projected $2.36 per share in profit, Accenture earned $2.78 per share.
Image source: Getty Images.
So what
Accenture grew its revenue 27% year over year, and its earnings 20% (or 28% on a pro forma basis). Operating profit margins expanded by 20 basis points, helping to keep pro forma profits rising faster than revenue.
Perhaps best of all, Accenture pointed out that it grew its "new bookings" (future revenue) by 30%. The logical implication: Revenue that grew rapidly in Q1 might grow even faster in future quarters.
Now what
As it turned out, however, Accenture played things conservatively on the guidance front. The company did incorporate its better-than-expected Q1 numbers into guidance, but still said it thinks revenue will rise only 19% to 22% this year (i.e., slower than in Q1), with earnings ranging from $10.32 to $10.60, and positive free cash flow (FCF) of $7.7 billion to $8.2 billion.
Really, if there's anything to quibble with at Accenture this quarter, it's not the performance -- it's the stock price. At a valuation in excess of $240 billion, and a stock price that's up more than 40% over the past year, Accenture stock currently costs more than 30 times its anticipated free cash flow through the end of the year.
Even if the company manages to grow FCF as fast as bookings grew last quarter (30%), the stock looks fully valued to me.
