Accenture PLC Stock Buy Recommendation Reiterated (ACN)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NEW YORK ( TheStreet) -- Accenture (NYSE: ACN) has been reiterated by TheStreet Ratings as a buy with a ratings score of A+ . The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, good cash flow from operations and increase in stock price during the past year. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • ACN's revenue growth has slightly outpaced the industry average of 7.3%. Since the same quarter one year prior, revenues slightly increased by 1.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • ACN has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.37, which illustrates the ability to avoid short-term cash problems.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the IT Services industry and the overall market, ACCENTURE PLC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • Net operating cash flow has increased to $1,708.19 million or 23.66% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 0.61%.
  • ACCENTURE PLC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ACCENTURE PLC increased its bottom line by earning $3.84 versus $3.40 in the prior year. This year, the market expects an improvement in earnings ($4.17 versus $3.84).

Accenture plc operates as a management consulting, technology services, and outsourcing company worldwide. The company has a P/E ratio of 17, above the average computer software & services industry P/E ratio of 16.9 and below the S&P 500 P/E ratio of 17.7. Accenture has a market cap of $41.5 billion and is part of the technology sector and computer software & services industry. Shares are up 22.8% year to date as of the close of trading on Friday.

You can view the full Accenture Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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