Accenture PLC (NYSE:ACN)

The analysis of the annual financial data reveals notable trends and changes over the six-year period from 2019 to 2024. The key financial metrics evaluated include Net Operating Profit After Taxes (NOPAT), Cost of Capital, Invested Capital, and Economic Profit.

Net Operating Profit After Taxes (NOPAT)

The NOPAT displayed a growth trend from 2019 to 2022, increasing steadily from approximately 4.99 billion to a peak of around 7.13 billion US dollars in 2022. However, in 2023, a slight decline to approximately 7.01 billion US dollars is observed, followed by a rebound in 2024 to approximately 7.52 billion US dollars. Overall, the long-term trend suggests an expansion in operating profitability, albeit with minor fluctuations in recent years.

Cost of Capital

The cost of capital remained relatively stable throughout the period, fluctuating slightly between 16.49% and 16.81%. There is no significant upward or downward trend, indicating that the company's expense of financing its capital has remained consistent over the years.

Invested Capital

The invested capital shows a continuous upward trend across all years analyzed, rising from approximately 20.11 billion US dollars in 2019 to about 36.96 billion US dollars in 2024. This steady increase suggests ongoing investments and asset accumulation, reflecting growth strategies or capital expansion activities.

Economic Profit

Economic profit increased from approximately 1.68 billion US dollars in 2019 to a peak of around 2.37 billion US dollars in 2021. Thereafter, it declined consistently in the following years, dropping to about 1.31 billion US dollars by 2024. This decline in economic profit despite increasing NOPAT and invested capital suggests that the returns on the new investments might not be generating sufficient value above the cost of capital, indicating decreasing efficiency in capital utilization or higher relative costs.

In summary, while profitability as measured by NOPAT has generally increased, the diminishing economic profit since 2021 signals potential concerns around value creation relative to the cost of capital. The steadily increasing invested capital combined with stable cost of capital implies growth initiatives, but the declining economic profit trend highlights that these investments may not be contributing proportionally to shareholder value in recent years.

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 demonstrated an overall declining trend over the six-year period under review. Initially, it increased from 1,676,915 thousand US dollars in 2019 to a peak of 2,365,487 thousand US dollars in 2021. However, from 2021 onwards, there was a consistent downturn, reaching 1,309,958 thousand US dollars by 2024. This suggests a decrease in the ability to generate profit above the cost of capital in the latter years.

Invested Capital

The invested capital showed a steady and significant increase throughout the entire period. Starting at 20,110,534 thousand US dollars in 2019, it rose continuously each year to reach 36,963,067 thousand US dollars by 2024. This indicates ongoing capital investments and growth in the asset base.

Economic Spread Ratio

The economic spread ratio, which indicates the return on invested capital above the cost of capital, experienced fluctuations but ultimately a downward trajectory. It rose from 8.34% in 2019 to a high of 9.6% in 2020, then gradually declined each year to 3.54% in 2024. This shrinking spread ratio corresponds with the decline in economic profit, signaling diminishing returns on the incremental invested capital.

Overall Insights

Despite a significant increase in invested capital, the economic profit has decreased in recent years, leading to a reduced economic spread ratio. This combination of rising capital base and falling profitability metrics highlights a potential concern regarding the efficiency and effectiveness of capital utilization. The declining economic spread ratio indicates the company is generating lower incremental returns above its cost of capital, which could impact long-term value creation if the trend continues.

Economic Profit

The economic profit showed an upward trend from 2019 to 2021, increasing from approximately 1.68 billion USD to 2.37 billion USD. However, starting in 2022, economic profit began a declining trajectory, dropping to around 2.14 billion USD, then falling more steeply to 1.44 billion USD in 2023 and further to approximately 1.31 billion USD in 2024. This indicates a significant reduction in profitability after peaking in 2021.

Adjusted Revenues

Adjusted revenues displayed consistent growth throughout the period. Revenues increased from about 43.5 billion USD in 2019 to 45 billion USD in 2020, followed by a more substantial jump to approximately 51.1 billion USD in 2021. Growth accelerated further in 2022 and 2023, reaching around 61.9 billion and 64.5 billion USD respectively, and slightly increased again in 2024 to approximately 65.2 billion USD. This steady rise in revenues suggests successful top-line expansion despite other challenges.

Economic Profit Margin

The economic profit margin improved from 3.85% in 2019 to a peak of 4.88% in 2020, reflecting increased efficiency or profitability relative to revenues. After 2020, the margin showed a persistent decline each year, falling to 4.63% in 2021, then decreasing more sharply to 3.46% in 2022. The downward trend continued in 2023 and 2024, reaching 2.23% and 2.01% respectively. This decline in margin despite rising revenues indicates decreasing profitability efficiency or increasing costs in relation to income.

Overall Analysis

The data reveals a pattern of growing revenues over the six-year period accompanied by a decreasing economic profit and declining economic profit margins after reaching their respective peaks in 2020 and 2021. This suggests that while the company successfully expanded its revenue base, it faced increasing challenges in maintaining profitability. Potential factors could include rising operating costs, increased investments without proportional profit return, or market conditions affecting economic profit generation. The sustained reduction in economic profit margin highlights the need for management focus on cost controls or operational efficiencies to improve overall financial performance.