Investors seeking a sanctuary from a potential bear market may want to examine the prospects of Dublin, Ireland-based professional services provider Accenture plc (ACN). With a tech turnaround underway, the stock looks positioned to weather the expected economic downturn.
Plus, the company offers a steady income stream through solid dividend payouts. Currently yielding 1.70%, ACN’s annual dividend of $4.48 has averaged a 1.33% yield over the last four years and has been growing at CAGRs of 3.9% and 11.3% over the past three and five years, respectively.
Inflation in April eased slightly, with a 0.4% month-on-month increase and a 4.9% year-over-year rise in the Consumer Price Index (CPI). The core CPI also rose by 0.4% month-on-month and 5.5% year-over-year.
Last week, the Federal Reserve announced a 25-basis-point hike in interest rates to the 5.00%-5.25% range and hinted at pausing its rate hikes soon. Meanwhile, New York Federal Reserve President John Williams believes it is too soon to determine if the Fed will halt its rate hikes.
Recent stress on the banking sector, a souring global outlook, and the looming debt ceiling issues have led to widespread worries about a potential recession. Although the S&P 500 index is up 7.8% year-to-date, Morgan Stanley’s Chief Equity Strategist Mike Wilson believes a disappointing earnings season could plunge the market back into bearish territory.
Given this economic backdrop, let’s look at some of ACN’s key financial metrics to deduce why this stock could be a solid buy now.
Accenture plc's Growth Over the Last 3 Years
The net income of ACN increased from $4.95 billion in May 2020 to $7.05 billion in November 2022, marking a growth rate of 29%. Despite overall growth, the net income experienced notable fluctuations over the three years, ranging between $6.94 billion in February 2023 and $7.08 billion in August 2021.
The revenue of ACN has been steadily increasing since May 31, 2020, when its revenue was $44.5 billion. It rose to $45.7 billion by February 28, 2021, and to $47.9 billion by May 31, 2021. The most recent data shows that the company’s revenue was $63.1 billion on February 28, 2023, with a growth rate of 41.5%.
The gross margin of ACN has fluctuated since 2020 but appears to have trended upwards overall, increasing from 31.4% on May 31, 2020, to 32.1% on February 28, 2023 – a growth rate of 2.2%. The most recent reported data show a gross margin of 32.3% on August 31, 2022.
The trend of ACN's DPS series data is one of growth, as it has increased from $2.40 in May 2020 to $4.18 in February 2023. The fluctuations have been steady, as the growth rate from the first value to the last is 4.33%. The most recent reported value was $4.18 in February 2023.
ACN’s Price Trends: November 18, 2022 to May 10, 2023
The trend for ACN between November 18, 2022, and May 10, 2023, appears to be generally increasing, with a few drops in between. The growth rate has been slow but steady over this period, with the initial share price at $289.50 on November 18, 2022, and slowly rising to a high of $283.78 on April 6, 2023, before dropping again.
Over the remaining months, the share price has remained around $265.45 as of May 10, 2023. Here is a chart of ACN's price over the past 180 days.
Accenture Ratings Trend Positively: Quality, Sentiment, and Stability
The overall POWR Ratings grade of ACN from November 12, 2022, until May 10, 2023, has generally been B, equating to Buy, with a few variations of C. Its rank in the A-rated Outsourcing - Tech Services industry is #3 out of nine.
The POWR Ratings for ACN show that the Quality dimension has the highest overall ratings, ranging from 95 to 97. The Sentiment and the Stability dimensions also stand out, with ratings ranging from 44 to 79 and 83 to 87, respectively. All three dimensions indicate positive trends over the past few months, indicating that ACN is in a strong position.
How does Accenture plc (ACN) Stack Up Against its Peers?
Other stocks in the Outsourcing - Tech Services sector that may be worth considering are The Hackett Group, Inc. (HCKT) and Gartner, Inc. (IT). These stocks also have an overall B (Buy) rating.
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ACN shares were trading at $270.54 per share on Thursday afternoon, up $1.65 (+0.61%). Year-to-date, ACN has gained 2.20%, versus a 7.74% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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