Has Accenture Stock Quietly Become a Value Opportunity?
We think Accenture (ACN) stock could be a good value buy. It is currently trading lower than average valuation, is growing, even though modestly, and has strong margins to go with its low valuation.
Buying stocks with low valuations or trading well below their peaks but maintaining strong margins allows investors to capture mean reversion and valuation re-rating potential. The downside risk is potentially less because high-margin businesses can sustain earnings and recover faster when sentiment or market conditions improve
What Is Happening With ACN
ACN may be down -29% so far this year but is now 37% cheaper based on its P/S (Price-to-Sales) ratio compared to 1 year ago, and also trades at a P/E (Price-to-Earnings) ratio that is below S&P 500 median.
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- Is Accenture Stock Poised for a Rally?
- Is the Market Overlooking Accenture Stock’s Next Move?
- A Decade of Rewards: Accenture Stock Returns $57 Bil to Investors
The stock may not reflect it yet, but here is what’s going well for the company. Accenture’s healthy margins, with Q4 fiscal 2025 adjusted operating margin at 15.1%, are sustained by a strong pipeline of high-value AI and cloud transformation engagements. While new bookings saw some deceleration in certain segments due to cautious enterprise spending, a substantial backlog provides revenue stability. The company’s $3 billion multi-year investment in AI is projected to triple FY25 GenAI revenue to $2.7 billion and nearly double bookings to $5.9 billion. The discounted valuation reflects market hesitation regarding the broader IT spending recovery and initial investor concerns about AI’s potential impact, despite Accenture’s proactive technology investments and strong competitive position.
ACN Has Reasonable Fundamentals
- Revenue Growth: 7.4% LTM and 4.2% last 3 year average. Low growth, but this is a margin and value play.
- Strong Margin: Nearly 14.4% 3-year average operating margin.
- No Major Margin Shock: Accenture has avoided any large large margin collapse in the last 12 months.
- Modest Valuation: Despite encouraging fundamentals, ACN stock trades at a PE multiple of 19.9
Below is a quick comparison of ACN fundamentals with S&P medians.
| ACN | S&P Median | |
|---|---|---|
| Sector | Information Technology | – |
| Industry | IT Consulting & Other Services | – |
| PE Ratio | 19.9 | 23.4 |
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|
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| LTM* Revenue Growth | 7.4% | 6.1% |
| 3Y Average Annual Revenue Growth | 4.2% | 5.4% |
| LTM Operating Margin Change | -0.1% | 0.2% |
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| LTM* Operating Margin | 14.7% | 18.8% |
| 3Y Average Operating Margin | 14.4% | 18.2% |
| LTM* Free Cash Flow Margin | 15.6% | 13.5% |
*LTM: Last Twelve Months
But What Is The Risk Involved?
While ACN stock may be a compelling investment opportunity, it’s always helpful to be aware of a stock’s history of drawdown. Accenture fell 38% during the Global Financial Crisis, 33% in the Covid pandemic, and nearly 40% on the inflation shock. Even the 2018 correction knocked it down over 22%. These aren’t small dips. Shows that no matter how solid the company looks, big market sell-offs hit even top names hard. Risk is always there. But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read ACN Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.
For more details and our view, see Buy or Sell ACN Stock.
Stocks Like ACN
Not ready to act on ACN? Consider these alternatives:
We chose these stocks using the following criteria:
- Greater than $2 Bil in market cap
- Meaningfully below 1Y high
- Current P/S < last few year average
- Strong operating margin
- P/E ratio below S&P 500 median
A portfolio of stocks with the criteria above would have performed has follows since 12/31/2016:
- Average 6-month and 12-month forward returns of 12.7% and 25.8% respectively
- Win rate (percentage of picks returning positive) of > 70% for both 6-month and 12-month periods
- Strategy consistent across market cycles
Portfolios Over Individual Stock Picks
Individual stocks can soar or tank but one thing matters: staying invested. The right portfolio can help you stay invested, capture upside and mitigate the downside associated with any individual stock.
The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.