# Accenture PLC (NYSE:ACN)

## Dividend Discount Model (DDM)

In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Dividends are the cleanest and most straightforward measure of cash flow because these are clearly cash flows that go directly to the investor.

### Intrinsic Stock Value (Valuation Summary)

Accenture PLC, dividends per share (DPS) forecast

US\$

Year Value DPSt or Terminal value (TVt) Calculation Present value at 15.82%
0 DPS01 4.48
1 DPS1 5.35 = 4.48 × (1 + 19.43%) 4.62
2 DPS2 6.32 = 5.35 × (1 + 18.16%) 4.71
3 DPS3 7.39 = 6.32 × (1 + 16.89%) 4.76
4 DPS4 8.54 = 7.39 × (1 + 15.62%) 4.75
5 DPS5 9.77 = 8.54 × (1 + 14.35%) 4.69
5 Terminal value (TV5) 762.46 = 9.77 × (1 + 14.35%) ÷ (15.82%14.35%) 365.85
Intrinsic value of Accenture PLC common stock (per share) \$389.37
Current share price \$349.58

Based on: 10-K (reporting date: 2023-08-31).

1 DPS0 = Sum of the last year dividends per share of Accenture PLC common stock. See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.

### Required Rate of Return (r)

 Assumptions Rate of return on LT Treasury Composite1 RF 4.01% Expected rate of return on market portfolio2 E(RM) 13.80% Systematic risk of Accenture PLC common stock βACN 1.21 Required rate of return on Accenture PLC common stock3 rACN 15.82%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

3 rACN = RF + βACN [E(RM) – RF]
= 4.01% + 1.21 [13.80%4.01%]
= 15.82%

### Dividend Growth Rate (g)

#### Dividend growth rate (g) implied by PRAT model

Accenture PLC, PRAT model

Average Aug 31, 2023 Aug 31, 2022 Aug 31, 2021 Aug 31, 2020 Aug 31, 2019 Aug 31, 2018
Selected Financial Data (US\$ in thousands)
Dividends 2,824,435 2,454,684 2,233,624 2,035,198 1,861,725 1,671,072
Net income attributable to Accenture plc 6,871,557 6,877,169 5,906,809 5,107,839 4,779,112 4,059,907
Revenues 64,111,745 61,594,305 50,533,389 44,327,039 43,215,013 41,603,428
Total assets 51,245,305 47,263,390 43,175,843 37,078,593 29,789,880 24,449,083
Total Accenture plc shareholders’ equity 25,692,839 22,106,097 19,529,454 17,000,536 14,409,008 10,364,753
Financial Ratios
Retention rate1 0.59 0.64 0.62 0.60 0.61 0.59
Profit margin2 10.72% 11.17% 11.69% 11.52% 11.06% 9.76%
Asset turnover3 1.25 1.30 1.17 1.20 1.45 1.70
Financial leverage4 1.99 2.14 2.21 2.18 2.07 2.36
Averages
Retention rate 0.61
Profit margin 10.99%
Asset turnover 1.35
Financial leverage 2.16

Dividend growth rate (g)5 19.43%

Based on: 10-K (reporting date: 2023-08-31), 10-K (reporting date: 2022-08-31), 10-K (reporting date: 2021-08-31), 10-K (reporting date: 2020-08-31), 10-K (reporting date: 2019-08-31), 10-K (reporting date: 2018-08-31).

2023 Calculations

1 Retention rate = (Net income attributable to Accenture plc – Dividends) ÷ Net income attributable to Accenture plc
= (6,871,5572,824,435) ÷ 6,871,557
= 0.59

2 Profit margin = 100 × Net income attributable to Accenture plc ÷ Revenues
= 100 × 6,871,557 ÷ 64,111,745
= 10.72%

3 Asset turnover = Revenues ÷ Total assets
= 64,111,745 ÷ 51,245,305
= 1.25

4 Financial leverage = Total assets ÷ Total Accenture plc shareholders’ equity
= 51,245,305 ÷ 25,692,839
= 1.99

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 0.61 × 10.99% × 1.35 × 2.16
= 19.43%

#### Dividend growth rate (g) implied by Gordon growth model

g = 100 × (P0 × rD0) ÷ (P0 + D0)
= 100 × (\$349.58 × 15.82%\$4.48) ÷ (\$349.58 + \$4.48)
= 14.35%

where:
P0 = current price of share of Accenture PLC common stock
D0 = the last year dividends per share of Accenture PLC common stock
r = required rate of return on Accenture PLC common stock

#### Dividend growth rate (g) forecast

Accenture PLC, H-model

Year Value gt
1 g1 19.43%
2 g2 18.16%
3 g3 16.89%
4 g4 15.62%
5 and thereafter g5 14.35%

where:
g1 is implied by PRAT model
g5 is implied by Gordon growth model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5g1) × (2 – 1) ÷ (5 – 1)
= 19.43% + (14.35%19.43%) × (2 – 1) ÷ (5 – 1)
= 18.16%

g3 = g1 + (g5g1) × (3 – 1) ÷ (5 – 1)
= 19.43% + (14.35%19.43%) × (3 – 1) ÷ (5 – 1)
= 16.89%

g4 = g1 + (g5g1) × (4 – 1) ÷ (5 – 1)
= 19.43% + (14.35%19.43%) × (4 – 1) ÷ (5 – 1)
= 15.62%