Accenture PLC (NYSE:ACN)

The analysis of the financial data over the six-year period reveals several key trends in the company's performance, capital investment, and economic value generation.

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes shows a consistent upward trend from 2019 to 2024, increasing from approximately 4.99 billion USD to about 7.52 billion USD. This reflects steady profitability growth with a notable increase between 2019 and 2022, followed by a slight dip in 2023 before rising again in 2024.

Cost of Capital

The cost of capital remained relatively stable throughout the period, fluctuating slightly within a narrow range from 16.4% to 16.72%. This indicates a consistent capital expense environment without significant changes in financing costs or risk profile.

Invested Capital

Invested capital demonstrates a continuous and substantial increase over the period, rising from about 20.1 billion USD in 2019 to nearly 37.0 billion USD in 2024. This steady growth suggests a strong commitment to reinvestment and expansion of operational capacity or assets.

Economic Profit

Economic profit increased from 1.69 billion USD in 2019 to peak at approximately 2.39 billion USD in 2021, after which it declined steadily to around 1.34 billion USD by 2024. Despite the rising NOPAT and invested capital, this decline indicates that the returns above the cost of capital have been decreasing recently, implying diminishing efficiency in generating value from the investments made.

In summary, while operating profitability and invested capital have grown consistently, the diminishing economic profit in the later years suggests that the incremental returns generated are not keeping pace with the increasing invested capital and the associated cost of capital. This could point to a need for more efficient capital allocation or improvements in operational effectiveness to enhance value creation going forward.

Net Income Attributable to Accenture plc

The net income exhibited a consistent upward trend over the analyzed period. Starting at approximately 4.78 billion US dollars in 2019, the figure increased annually, reaching about 7.26 billion US dollars by 2024. There was a notable acceleration in growth between 2020 and 2022, where net income rose from around 5.11 billion to nearly 6.88 billion US dollars. The increase plateaued slightly in 2023 but regained momentum going into 2024.

Net Operating Profit After Taxes (NOPAT)

NOPAT also showed a generally positive trajectory from 2019 to 2024. Beginning near 4.99 billion US dollars in 2019, it rose consistently each year, peaking at approximately 7.52 billion US dollars in 2024. The period between 2019 and 2021 reflected robust growth, with significant increases each year. Growth decelerated between 2022 and 2023, with a slight decline from roughly 7.13 billion to 7.01 billion US dollars, followed by a rebound in 2024. Overall, NOPAT growth aligns closely with net income trends but shows a modest dip in the mid-period.

Comparative Insights

Both profitability metrics reflect healthy financial performance with strong upward momentum. The slight divergence in 2023, where net income held steady but NOPAT decreased mildly, may suggest variations in tax expenses, operating efficiencies, or non-operating factors impacting net income. The recovery in 2024 implies successful management interventions or favorable operating conditions resuming. The sustained increase reinforces a solid capacity for generating profit from operations and retaining earnings attributable to the company.

Income Tax Expense

The income tax expense shows a generally upward trend over the six-year period. Starting at approximately 1.41 billion in 2019, it increased steadily to reach about 2.28 billion by 2024. Notably, there is a significant rise between 2021 and 2022, where the expense increased by approximately 436 million. Although there is a slight dip in 2023 compared to 2022, the expense resumes its upward trajectory in 2024.

Cash Operating Taxes

Cash operating taxes demonstrate more variability over the years. In 2019, the amount was roughly 1.49 billion, which declined slightly in 2020 to about 1.44 billion. Subsequently, there was a pronounced increase in 2021 and 2022, peaking near 2.45 billion. The amount stabilized thereafter, with a slight decrease in both 2023 and 2024, maintaining levels just above 2.35 billion.

Comparison Between Income Tax Expense and Cash Operating Taxes

Throughout the period, cash operating taxes consistently exceed the recorded income tax expense, suggesting timing or classification differences between reported expenses and actual cash outflows. Both metrics exhibit growth trends, but cash operating taxes show a more pronounced surge in the middle years (2021-2022) followed by stabilization, whereas income tax expense rises more steadily with minor fluctuations.

Total reported debt & leases

The total reported debt and leases exhibit a fluctuating trend over the observed period. Starting at approximately 3.86 billion US dollars in August 2019, the figure declines consistently each year until August 2023, reaching about 3.15 billion. However, in the final year reported (August 2024), there is a notable increase to approximately 4.12 billion, representing the highest point in the period.

Total Accenture plc shareholders’ equity

Shareholders' equity shows a steady and significant upward trajectory throughout the time span. Commencing at roughly 14.41 billion US dollars in August 2019, equity increases annually without any dip, reaching about 28.29 billion by August 2024. This almost doubles the initial value and indicates consistent growth in retained earnings, capital injections, or revaluation reserves.

Invested capital

Invested capital follows a persistent growth trend across the six years. Beginning from around 20.11 billion US dollars in August 2019, it rises each year to culminate at approximately 36.96 billion in August 2024. This increase demonstrates expanding capital deployment in operations, assets, or acquisitions, growing by over 80% from the start to the end of the period.

Overall Analysis

The company shows robust equity growth coupled with an increase in invested capital, signaling expansion and possibly increased business activities or asset base. The fluctuation in total debt and leases, with an initial reduction followed by a pronounced rise in the latest year, suggests a possible strategic shift in financing structure or capital raising efforts in the most recent period. This latest increase in debt might warrant further review to assess its impact on financial risk and capital cost.

Economic Profit

The economic profit demonstrates an initial upward trend from 2019 to 2021, increasing from approximately $1.69 billion to $2.39 billion. However, from 2021 onward, there is a consistent decline, with economic profit decreasing to around $1.34 billion by 2024. This suggests a reduction in value creation based on the economic profit metric over the last three years.

Invested Capital

Invested capital shows a steady and continuous increase throughout the entire period. Starting at about $20.11 billion in 2019, it rises each year, reaching nearly $36.96 billion by 2024. This upward trajectory indicates ongoing investments or asset accumulation by the company annually.

Economic Spread Ratio

The economic spread ratio peaked at 9.68% in 2020, followed by a downward trend each subsequent year. It declines from 9.11% in 2021 to 3.63% in 2024, highlighting a diminishing margin between return on invested capital and cost of capital. This reduction may indicate decreasing efficiency in generating returns above capital costs.

Overall Analysis

While invested capital has expanded steadily, both economic profit and economic spread ratio have experienced declines in the latter years. This combination suggests that although the company is growing its asset base, the effectiveness in generating economic profit and maintaining a healthy spread over the cost of capital is weakening. The decline in economic spread ratio alongside economic profit indicates possible challenges in maintaining profitability and value creation relative to the rising capital base.

Economic Profit

The economic profit demonstrates a fluctuating trend over the periods analyzed. Starting at approximately 1.69 billion US dollars in 2019, it increased noticeably to a peak of about 2.38 billion in 2021. However, from 2021 onwards, economic profit has shown a consistent decline, dropping to roughly 1.34 billion by 2024. This downward trend post-2021 suggests possible challenges in maintaining profitability at previous levels.

Adjusted Revenues

Revenues present a generally upward trajectory, increasing significantly from 43.5 billion US dollars in 2019 to 65.2 billion in 2024. The growth is particularly strong from 2020 through 2022, with more moderate increments thereafter. Despite fluctuations in economic profit, revenue expansion appears consistent, indicating successful top-line growth over the reviewed years.

Economic Profit Margin

The economic profit margin mirrors the pattern observed in economic profit, initially rising from 3.89% in 2019 to a peak of 4.93% in 2020. It then undergoes a sustained decline to 2.06% in 2024. This contraction in margin despite increasing revenues implies rising costs or diminishing efficiencies impacting profitability relative to revenue.

Overall Insights

Although the company has achieved strong revenue growth throughout the periods, its economic profit and profit margins have faced downward pressure starting in 2021. This divergence suggests that the cost structure or investment dynamics may be reducing the profitability efficiency. Maintaining the upward revenue trend while addressing factors affecting economic profit may be critical for future financial health.