Could Cash Machine Accenture Stock Be Your Next Buy?

Accenture (ACN) could be a good pick for your portfolio, with its high cash yield, good fundamentals, and discounted valuation. Companies like this can use cash to fuel additional revenue growth, or simply pay their shareholders through dividends or buybacks. Either move makes them attractive to the market

What Is Happening With ACN

ACN stock is currently trading at P/S (Price-to-Sales) ratio that is at a meaningful discount to its 3-month and 2-year highs, and also below its 3-year average.

The stock may not reflect it yet, but here is what’s going well for the company. Accenture’s Q1 FY26 new bookings reached $20.9 billion, a 10% local currency increase, with advanced AI bookings nearly doubling to $2.2 billion, reflecting strong client demand for AI transformation services. The company secured 33 contracts over $100 million, bolstering its backlog. Management reconfirmed full-year revenue guidance of 2-5% local currency growth, anticipating continued demand for its integrated digital and AI solutions. Acquisitions, such as DLB Associates for data center consulting, also enhance its market position.

ACN Has Good Fundamentals

• Good Cash Yield: Not many stocks offer free cash flow yield of 7.7%, but Accenture stock does
• Strong Margin: Last 12 month operating margin of 14.4%
• Growth: Last 12 revenue growth of 6.6% – low growth, but this selection is all about high yield and margin
• Valuation: ACN stock currently trading at 38% below 2Y high, 16% below 1M high, and at a PS lower than 3Y average.

Below is a quick comparison of ACN fundamentals with S&P medians.

*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’s stock has seen tough dips even with its strong fundamentals. During the Global Financial Crisis, it dropped about 38%. The 2018 correction wiped out 23%, and the Covid selloff hit around 33%. The inflation shock was the harshest, with a near 40% decline. So, even solid companies like ACN aren’t immune when market turmoil hits hard. 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:

1. Qualcomm (QCOM)
2. Paychex (PAYX)
3. Lululemon Athletica (LULU)

We chose these stocks using the following criteria:

1. Greater than $2 Bil in market cap
2. Dipped last month & meaningfully below 2Y high
3. Current P/S < last few year average
4. Strong operating margin with no instances of large margin collapse
5. High free cash flow yield

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 10.4% and 20.4% respectively
• Win rate (percentage of picks returning positive) of about 74% for 12-month period
• Strategy consistent across market cycles

The Right Way To Invest Is Through Portfolios

Stocks can jump or crash but long term success comes from staying invested. The right portfolio helps you ride gains and cushion single stock drops

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.