This site requires a more recent version of Adobe Flash Player to function properly.
Go here to get Flash.
Trefis's graphical modelling tools require Flash, but here's a preview of some of the content you'll see once
Flash is enabled:
Investment Overview for Accenture (NYSE:ACN)
${header:potential}
Below are key drivers of Accentures's value that present opportunities for upside or downside to the current Trefis price estimate for Accenture
Outsourcing
- Technology Outsourcing Revenue: We currently estimate that Technology outsourcing revenues will grow at nearly 7% per year till the end of our forecast period. Currently, we estimate that revenues are $7.8 billion in 2012. If revenues were to grow at a much slower rate of ~1% due to competition and Europe slowdown concerns, we can expect a 5% downside to the current Trefis Price estimate. If outsourcing revenues grow at a rate of 15%, we can expect an upside of 10% to the current Trefis Price estimate.
Management Consulting
- Management Consulting EBITDA Margins: We forecast that Management Consulting EBITDA profit margins will remain flat at its 2011-2012 level of ~20% for the rest of the Trefis forecast period. If EBITDA margins were to increase to 25% by the end of the forecast period, we can expect a 10% upside to the current Trefis price estimate. If margins fall due to a slowly recovering economy and Europe slowdown concerns, and reach 15%, we can expect a ~5% downside to the current Trefis price estimate.
${header:summary}
Accenture offers outsourcing and consulting services primarily to Fortune 500 companies. It helps its clients improve their business processes by leveraging technology and utilizing outsourced service providers wherever appropriate. For instance Accenture may help the IT department of a client to outsource the development and maintenance of software applications used by company employees. The clients benefit through long term IT cost savings and improved processes for application development.
In Technology Consulting, Accenture competes with IBM at the top of the heap. Accenture's expertise in the technology space includes IT Strategy, Enterprise IT Architecture and Infrastructure, Management of Data (Security, Privacy and Storage), and the entire spectrum of Application Software, ranging from development to maintenance.
Accenture is one of the best positioned companies in IT Services in today's economic context because of three reasons:
- It has a very resilient business model with a healthy mix of outsourcing and consulting at a ~45/55 revenue ratio.
-
The firm is a market leader in outsourcing and is the growth engine of IT Services along with IBM and HP, supported by its extensive Global Delivery Network (GDN)
-
It has a strong consulting practice along with IBM in the IT space and supported by its ability to leverage specialized industry expertise through its group of management consultants.
${header:sourcesofvalue}
Market Leader in Outsourcing
The share of outsourcing in Accenture's revenues has gradually increased from ~ 39% in 2008 to ~43% in 2012. We expect it to stabilize around the current level going forward. Outsourcing is key to growth for IT Services and according to International Association of Outsourcing Professionals (IAOP), Accenture leads the outsourcing segment. Accenture is also one of the largest consulting company in the world.
${header:trends}
Growing Demand for Software Application Outsourcing
Since software development and maintenance is easier to outsource as compared to outsourcing complete processes or IT infrastructure (given the increased complexity), Application Outsourcing is growing faster than BPO and Infrastructure Outsourcing.
Trefis Forecast Rationale for Consultant Bill Rate per Hour
${header:what}
This refers to the average rate per hour that Accenture charges its clients for its consultants working on a project.
${header:historicals}
Historically, the average bill rate has increased by about 15% from 2005 to 2008.
In 2009, the ${forecast} decreased by 15% as the consulting industry was hit hard by the economic recession forcing Accenture to cut down on bill rates. The rates remained almost flat in 2010 before increasing slightly in 2011 to $175.
However, in 2012 ${forecast} declined as clients reduced their consulting spending and accenture had to cut down on bill rates again.
Going forward we expect ${forecast} to increase gradually as economic conditions improve and reach $220 by the end of our forecast period.
${header:rationale}
Trefis considered the following factors for its forecast:
- As economic conditions improve the bill rate should increase
- As US economy went into recession, several firms deferred decisions to seek consulting and put a hold on existing projects. With the economic environment improving the firms will once again look for advice in order to compete better in a fast changing environment. This will result in a greater demand for management consulting solutions allowing Accenture to charge higher ${forecast} in the future.
- According to the firm, its Management Consulting as a business has held up relatively to lesser firms even in during the economic recession and, hence, pricing should go up again once the business environment improves.
- Accenture Management Consulting competes with other top leagues players such as Mckinsey, Boston Consulting Group in terms of expertise. With experience varying from strategic consulting to the optimization of processes ranging from operations to finance, Accenture covers a wide variety of fields making it one of the more sought after firms.
Back to Company OverviewHow Does Trefis Modelling Work?
How do we get the historical numbers for this chart?
Trefis has a team of in-house Analysts who gather historical data from company filings and other verifiable sources. When historicals are available, we explain how we got them at the bottom of the Trefis analysis section below.
Who came up with the Trefis forecast for future years?
The Trefis team of in-house Analysts considers a variety of factors when projecting any forecast. The rationale for our projections is explained in the Trefis analysis section below.
How does my dragging the trendline on the chart impact the stock price?
- We use forecasts for business drivers to calculate forecasted Revenues and Profits for each division of the company.
- We then use forecasted Profits in a Discounted Cash Flow (DCF) model to obtain the Price Estimate for the company.
See more on:
DCF MethodologyView All Help Topics