Sunday, April 12, 2009

Can Acn do it?

Looks like the newest stock in my mechanical portfolio is Accenture, ACN. This is a 17b company, certainly one of the largest in my mechanical portfolio (which regular readers will recall takes stocks new to the 30 over 50m screen in the past year). ACN just continues to make wads of money, but has dropped to under $28. I actually made some money on ACN a year or so ago, sold around $36. Obviously they are a leading consulting firm, actually with acquisition of EDS by HP, they are a dying breed in being independent from major hardware.

The catalyst for them entering the screen was lowering their guidance to $2.60 to 2.67 from $2.78 to $2.85. Doesn't seem like much, but it took them from about $32 to $28 in past two weeks during a nice rally. Here is my calc of their ratios, note consultants often have high ROIC as it is not a capital intensive business:

+ Operating Income After Depreciation 3,138.20
- Minority Interest - Income Account 458.26
= Income for Calculation 2,679.94

Market Cap Yahoo 16,990,000

Share Price 27.71
+ Market Cap Calc 16,990.00
+ Preferred Capital -
+ Debt in Current Liabilities 1.02
+ Long-Term Debt 0.53

Cash and Short-Term Investments 2,991.45
- Excess Cash 2,362.92
= Enterprise Value 14,628.64

+ Property Plant and Equipment - Net 708.64
+ Receivables 3,626.06
+ Inventories -
+ Other Current Assests 909.44
+ Working Cash 628.54
- Accounts Payable 716.47
- Current Liabilities - Other 4,447.57
= Invested Capital 708.64
Earnings Yield 18%
ROIC 378%

Naturally the $2.3b of excess cash catches my eye. They also had a 7% drop is YoY revenues. I like ACN and will certainly put on a close watch. I think if they drop a bit more (I think the market is getting toppy) I may be back in... perhaps a target buy price around $25.

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