Last Friday, Accenture (NYSE: ACN) stock jumped 4.5% after the company beat earnings expectations yet again and raised guidance. Investors cheered the company's results, outlook. and impressive financial ratios.
Well, institutional investors did, anyway. They own about 82% of the company. Even with a market cap of about $35 billion, the stock is not well known among individual investors.
And that's their loss.
Checking all the right boxes
Accenture has significant international exposure and a growing dividend, and it regularly beats earnings estimates. Its client list is a Who's Who of Global 1000 companies. And it has a talented and deep management bench. IBM's (NYSE: IBM) services business would like to be more like Accenture. That's quite a compliment, considering most large tech players want to be more like IBM.
Earnings per share of $0.75 for Accenture's most recent quarter beat the consensus estimate of $0.72 and grew 25% year-over-year. It's Accenture's 13th earnings beat in 14 quarters. With two quarters left in the fiscal year, management guided fiscal 2011 EPS up by $0.14 to between $3.22 and $3.30, an increase of 21% to 24%. Revenue of $6.5 billion increased 17% year over year. New bookings were $7 billion.
Accenture's financials compare favorably with other major providers of IT services -- IBM, Hewlett-Packard (NYSE: HPQ) and Computer Sciences (NYSE: CSC) -- and hold their own versus other large tech companies.
Growth Over the Past Four Quarters
|
Company |
Revenue Growth |
EPS Growth* |
Net Margin |
ROE |
|---|---|---|---|---|
| Accenture |
11.0% |
26.2% |
8.0% |
60.2% |
| IBM |
4.3% |
15.1% |
14.9% |
64.9% |
| Hewlett-Packard |
8.8% |
18.0% |
7.2% |
22.0% |
| Computer Sciences |
1.0% |
(13.5%) |
5.1% |
12.0% |
| Apple |
63.3% |
74.6% |
21.8% |
36.8% |
| Microsoft |
13.6% |
28.8% |
30.8% |
44.3% |
|
24.0% |
28.9% |
29.0% |
20.7% |
*Excluding extraordinary items.
Source: Capital IQ, a division of Standard & Poor's.
|
Company |
Trailing P/E |
Forward P/E |
Forward Dividend Yield |
|---|---|---|---|
| Accenture |
17.6 |
15.6 |
1.7% |
| IBM |
13.8 |
12.2 |
1.6% |
| Hewlett-Packard |
8.9 |
8.2 |
1.1% |
| Computer Sciences |
9.1 |
9.1 |
1.7% |
| Apple |
19.3 |
14.3 |
N/A |
| Microsoft |
10.9 |
9.7 |
2.5% |
|
19.7 |
16.9 |
N/A |
Sources: CNBC.com and Yahoo! Finance, as of March 25 close.
It's no surprise that Accenture trades at a premium to competitors. Accenture is well positioned to benefit from an improving economy because of its exposure to project-based work and strong customer relationships. CSC has high exposure to government clients and is suffering from budget cuts in that sector. In its most recent quarterly report, HP -- which acquired services goliath EDS in 2008 -- cited its services business as an area for improvement.
IBM is the competitor that worries Accenture, but even mighty IBM saw low-single-digit revenue growth in its services business last quarter. As much as I admire IBM and like IBM stock -- especially at its current valuation -- Accenture is plain and simple out-executing its competitors.
Foolish takeaway
Accenture is a well-managed company with a global presence. It's taking market share and benefiting from an improving economy. The people on its management acts like the owners they are, which is a plus for shareholder value. Individual investors would be well served to take a look at this little-known company.
To stay updated on Accenture or any other company mentioned in this article, add them to our free My Watchlist service today:
- Add Accenture to My Watchlist.
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- Add CSC to My Watchlist.
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- Add Hewlett-Packard to My Watchlist.
- Add IBM to My Watchlist.
- Add Microsoft to My Watchlist.
