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Sure Accenture Stock Is High-Priced, but It’s Reasonably Valued


Tech names have defined pandemic-driven fears and IT consulting firm Accenture (NYSE:ACN) is part of the digital renaissance. Even with the novel coronavirus’ toll on the broader economy, ACN stock’s ascent has been remained largely unchecked for months.

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As a result, prospective investors must contend with a solid tech name whose shares are trading near their 52-week high. That’s not an easy pill for value-oriented investors to swallow. On the other hand, a profitable company could be worth investing in even at an elevated price point, depending on the circumstances.

Some criteria to look for include strong earnings and revenues as well as a clear vision of where the company’s headed. Accenture checks all of these boxes and, just as importantly, it’s entrenched in a digital revolution that’s now part of the global business ecosystem.

A Closer Look at ACN Stock

With the shares trading near its 52-week high point of $218.45, some folks might balk at the idea of taking a position in ACN stock now. They might instead choose to wait until the stock is closer to the 52-week low price of $137.15.

That strategy, however, is only likely to lead to frustration. ACN stock bottomed out during the peak of the coronavirus crisis. It would probably take another major crisis to bring the stock back down to that level. Being patient is all fine and good, but investors have to be realistic as well.

Instead of waiting for a price collapse that’s not likely happen, investors should consider whether the current share price is fair and reasonable. To help with that, we can observe that ACN stock’s trailing 12-month price-to-earnings ratio is 28.23.

That’s not too bad at all for a tech company. Additionally, ACN stock offers a decent forward annual dividend yield of 1.48%. So, long-term investors can factor those dividend payments in as they weigh the benefits of owning ACN shares.

Helping Businesses Adapt to the New Reality

The coronavirus pandemic might have battered the ACN share price temporarily, but it didn’t harm the industry in which Accenture operates. If anything, the pandemic, tragic as it is, has only helped the IT consulting market as more businesses commence or complete their digital transformations.

As Accenture reports, “The new reality is that 71% of organizations are in the middle or on the brink of significant disruption.” That’s a high proportion, but an argument could be made that the number is really closer to 80% or even 90%.

After all, the pandemic forced many businesses to operate remotely and/or in the cloud. A few were undoubtedly doing that already, but many assuredly were not. Accenture was way ahead of the curve, helping businesses to facilitate the often difficult transition.

And Accenture truly does offer a full suite of services in this area. The company helps businesses move into the cloud and shore up their cybersecurity. It can also assist with artificial-intelligence integration as well as blockchain adoption.

Accenture Beats the Street

Financials definitely matter, and Accenture easily cleared the bar with the company’s fiscal third-quarter results. For instance, Accenture’s quarterly revenue of $11 billion beat Wall Street’s projection of $10.87 billion.

Furthermore, the company’s quarterly profit of $1.90 per share exceeded the analyst consensus of $1.85 per share. On top of that, Accenture’s quarterly new bookings were an impressive $11 billion, marking an increase of 4%.

Accenture’s guidance for the company’s fourth fiscal quarter should also provide encouragement to shareholders. Specifically, the company projects robust revenue in the range of $10.6 billion to $11 billion.

All in all, CEO Julie Sweet is right to tout Accenture’s “ability to deliver mission-critical services for the world’s leading companies” during this time of crisis.

The Bottom Line

Accenture really knocked it out of the park with its earnings results, and the company’s forward guidance is at once optimistic and entirely feasible. A long position in ACN stock, therefore, is thoroughly justifiable regardless of its rich premium.

As of this writing, David Moadel did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media, https://investorplace.com/2020/07/acn-stock-is-high-priced-but-reasonably-valued/.

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