Stock Analysis on Net

Accenture PLC (NYSE:ACN)

Present Value of Free Cash Flow to the Firm (FCFF)

Microsoft Excel

Intrinsic Stock Value (Valuation Summary)

Accenture PLC, free cash flow to the firm (FCFF) forecast

US$ in thousands, except per share data

Microsoft Excel
Year Value FCFFt or Terminal value (TVt) Calculation Present value at 15.48%
01 FCFF0 9,031,719
1 FCFF1 10,691,360 = 9,031,719 × (1 + 18.38%) 9,257,850
2 FCFF2 12,454,034 = 10,691,360 × (1 + 16.49%) 9,338,228
3 FCFF3 14,272,089 = 12,454,034 × (1 + 14.60%) 9,266,573
4 FCFF4 16,085,975 = 14,272,089 × (1 + 12.71%) 9,043,910
5 FCFF5 17,826,564 = 16,085,975 × (1 + 10.82%) 8,678,680
5 Terminal value (TV5) 423,599,480 = 17,826,564 × (1 + 10.82%) ÷ (15.48%10.82%) 206,225,066
Intrinsic value of Accenture PLC capital 251,810,307
Less: Outstanding debt (fair value) 147,903
Intrinsic value of Accenture PLC common stock 251,662,404
 
Intrinsic value of Accenture PLC common stock (per share) $400.07
Current share price $340.94

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

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.


Weighted Average Cost of Capital (WACC)

Accenture PLC, cost of capital

Microsoft Excel
Value1 Weight Required rate of return2 Calculation
Equity (fair value) 214,466,158 1.00 15.49%
Outstanding debt (fair value) 147,903 0.00 4.15% = 5.40% × (1 – 23.20%)

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

1 US$ in thousands

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 629,043,698 × $340.94
= $214,466,158,396.12

   Outstanding debt (fair value). See details »

2 Required rate of return on equity is estimated by using CAPM. See details »

   Required rate of return on debt. See details »

   Required rate of return on debt is after tax.

   Estimated (average) effective income tax rate
= (23.40% + 24.00% + 22.80% + 23.50% + 22.50% + 23.00%) ÷ 6
= 23.20%

WACC = 15.48%


FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

Accenture PLC, PRAT model

Microsoft Excel
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)
Interest expense 47,525 47,320 59,492 33,071 22,963 19,539
Net income attributable to Accenture plc 6,871,557 6,877,169 5,906,809 5,107,839 4,779,112 4,059,907
 
Effective income tax rate (EITR)1 23.40% 24.00% 22.80% 23.50% 22.50% 23.00%
 
Interest expense, after tax2 36,404 35,963 45,928 25,299 17,796 15,045
Add: Dividends 2,824,435 2,454,684 2,233,624 2,035,198 1,861,725 1,671,072
Interest expense (after tax) and dividends 2,860,839 2,490,647 2,279,552 2,060,497 1,879,521 1,686,117
 
EBIT(1 – EITR)3 6,907,961 6,913,132 5,952,737 5,133,138 4,796,908 4,074,952
 
Current portion of long-term debt and bank borrowings 104,810 9,175 12,080 7,820 6,411 5,337
Long-term debt, excluding current portion 43,093 45,893 53,473 54,052 16,247 19,676
Total Accenture plc shareholders’ equity 25,692,839 22,106,097 19,529,454 17,000,536 14,409,008 10,364,753
Total capital 25,840,742 22,161,165 19,595,007 17,062,408 14,431,666 10,389,766
Financial Ratios
Retention rate (RR)4 0.59 0.64 0.62 0.60 0.61 0.59
Return on invested capital (ROIC)5 26.73% 31.19% 30.38% 30.08% 33.24% 39.22%
Averages
RR 0.61
ROIC 30.33%
 
FCFF growth rate (g)6 18.38%

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).

1 See details »

2023 Calculations

2 Interest expense, after tax = Interest expense × (1 – EITR)
= 47,525 × (1 – 23.40%)
= 36,404

3 EBIT(1 – EITR) = Net income attributable to Accenture plc + Interest expense, after tax
= 6,871,557 + 36,404
= 6,907,961

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [6,907,9612,860,839] ÷ 6,907,961
= 0.59

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 6,907,961 ÷ 25,840,742
= 26.73%

6 g = RR × ROIC
= 0.61 × 30.33%
= 18.38%


FCFF growth rate (g) implied by single-stage model

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (214,614,061 × 15.48%9,031,719) ÷ (214,614,061 + 9,031,719)
= 10.82%

where:

Total capital, fair value0 = current fair value of Accenture PLC debt and equity (US$ in thousands)
FCFF0 = the last year Accenture PLC free cash flow to the firm (US$ in thousands)
WACC = weighted average cost of Accenture PLC capital


FCFF growth rate (g) forecast

Accenture PLC, H-model

Microsoft Excel
Year Value gt
1 g1 18.38%
2 g2 16.49%
3 g3 14.60%
4 g4 12.71%
5 and thereafter g5 10.82%

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

Calculations

g2 = g1 + (g5g1) × (2 – 1) ÷ (5 – 1)
= 18.38% + (10.82%18.38%) × (2 – 1) ÷ (5 – 1)
= 16.49%

g3 = g1 + (g5g1) × (3 – 1) ÷ (5 – 1)
= 18.38% + (10.82%18.38%) × (3 – 1) ÷ (5 – 1)
= 14.60%

g4 = g1 + (g5g1) × (4 – 1) ÷ (5 – 1)
= 18.38% + (10.82%18.38%) × (4 – 1) ÷ (5 – 1)
= 12.71%