Stock Analysis on Net
Stock Analysis on Net

Accenture PLC (NYSE:ACN)

Present Value of Free Cash Flow to Equity (FCFE)

Microsoft Excel

In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to equity (FCFE) is generally described as cash flows available to the equity holder after payments to debt holders and after allowing for expenditures to maintain the company asset base.

Intrinsic Stock Value (Valuation Summary)

Accenture PLC, free cash flow to equity (FCFE) forecast

US$ in thousands, except per share data

Microsoft Excel
Year Value FCFEt or Terminal value (TVt) Calculation Present value at 15.71%
01 FCFE0 9,442,305
1 FCFE1 11,123,776 = 9,442,305 × (1 + 17.81%) 9,613,278
2 FCFE2 12,914,720 = 11,123,776 × (1 + 16.10%) 9,645,472
3 FCFE3 14,773,463 = 12,914,720 × (1 + 14.39%) 9,535,424
4 FCFE4 16,647,437 = 14,773,463 × (1 + 12.68%) 9,285,906
5 FCFE5 18,474,831 = 16,647,437 × (1 + 10.98%) 8,905,875
5 Terminal value (TV5) 432,950,156 = 18,474,831 × (1 + 10.98%) ÷ (15.71% – 10.98%) 208,705,575
Intrinsic value of Accenture PLC common stock 255,691,530
 
Intrinsic value of Accenture PLC common stock (per share) $409.00
Current share price $353.95

Based on: 10-K (reporting date: 2024-08-31).

1 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)

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Assumptions
Rate of return on LT Treasury Composite1 RF 4.65%
Expected rate of return on market portfolio2 E(RM) 13.79%
Systematic risk of Accenture PLC common stock βACN 1.21
 
Required rate of return on Accenture PLC common stock3 rACN 15.71%

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).

2 See details »

3 rACN = RF + βACN [E(RM) – RF]
= 4.65% + 1.21 [13.79% – 4.65%]
= 15.71%

FCFE Growth Rate (g)

FCFE growth rate (g) implied by PRAT model

Accenture PLC, PRAT model

Microsoft Excel
Average Aug 31, 2024 Aug 31, 2023 Aug 31, 2022 Aug 31, 2021 Aug 31, 2020 Aug 31, 2019
Selected Financial Data (US$ in thousands)
Dividends 3,238,259 2,824,435 2,454,684 2,233,624 2,035,198 1,861,725
Net income attributable to Accenture plc 7,264,787 6,871,557 6,877,169 5,906,809 5,107,839 4,779,112
Revenues 64,896,464 64,111,745 61,594,305 50,533,389 44,327,039 43,215,013
Total assets 55,932,363 51,245,305 47,263,390 43,175,843 37,078,593 29,789,880
Total Accenture plc shareholders’ equity 28,288,646 25,692,839 22,106,097 19,529,454 17,000,536 14,409,008
Financial Ratios
Retention rate1 0.55 0.59 0.64 0.62 0.60 0.61
Profit margin2 11.19% 10.72% 11.17% 11.69% 11.52% 11.06%
Asset turnover3 1.16 1.25 1.30 1.17 1.20 1.45
Financial leverage4 1.98 1.99 2.14 2.21 2.18 2.07
Averages
Retention rate 0.60
Profit margin 11.22%
Asset turnover 1.26
Financial leverage 2.09
 
FCFE growth rate (g)5 17.81%

Based on: 10-K (reporting date: 2024-08-31), 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).

2024 Calculations

1 Retention rate = (Net income attributable to Accenture plc – Dividends) ÷ Net income attributable to Accenture plc
= (7,264,787 – 3,238,259) ÷ 7,264,787
= 0.55

2 Profit margin = 100 × Net income attributable to Accenture plc ÷ Revenues
= 100 × 7,264,787 ÷ 64,896,464
= 11.19%

3 Asset turnover = Revenues ÷ Total assets
= 64,896,464 ÷ 55,932,363
= 1.16

4 Financial leverage = Total assets ÷ Total Accenture plc shareholders’ equity
= 55,932,363 ÷ 28,288,646
= 1.98

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 0.60 × 11.22% × 1.26 × 2.09
= 17.81%

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

g = 100 × (Equity market value0 × r – FCFE0) ÷ (Equity market value0 + FCFE0)
= 100 × (221,276,586 × 15.71% – 9,442,305) ÷ (221,276,586 + 9,442,305)
= 10.98%

where:
Equity market value0 = current market value of Accenture PLC common stock (US$ in thousands)
FCFE0 = the last year Accenture PLC free cash flow to equity (US$ in thousands)
r = required rate of return on Accenture PLC common stock

FCFE growth rate (g) forecast

Accenture PLC, H-model

Microsoft Excel
Year Value gt
1 g1 17.81%
2 g2 16.10%
3 g3 14.39%
4 g4 12.68%
5 and thereafter g5 10.98%

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 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= 17.81% + (10.98% – 17.81%) × (2 – 1) ÷ (5 – 1)
= 16.10%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 17.81% + (10.98% – 17.81%) × (3 – 1) ÷ (5 – 1)
= 14.39%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 17.81% + (10.98% – 17.81%) × (4 – 1) ÷ (5 – 1)
= 12.68%