Sector: Information Technology BUY · 2013. 2. 8. · valuation provides a good long-term...

Applied Portfolio ManagementAnalysts: Brenna Koch, Chris Landqvist,

Justin Pippitt, Kelli Coldiron, Wei Pi

Report Date: 5/7/2012

Market Cap (mm) $41,528 Annual Dividend $1.35 Beta (S&P 500 Index) 0.10

Return on Capital 44.2% Dividend Yield 2.1% Annualized Alpha 24.8% Compared With:

EPS (ttm) $3.90 Price/Earnings (ttm) 16.5 Institutional Ownership 5.3% Oracle Corporation

Current Price $64.44 Economic Value-Added (ttm) $2,059 Short Interest (% of Shares) 1.2% Cognizant Technology Solutions

12-mo. Target Price $70.00 Free Cash Flow Margin 13.4% Days to Cover Short 2.2 and the S&P 500 Index

Business Description

Total Revenue 0.3% Free Cash Flow -1.8%

EBIT 5.3% Total Invested Capital 11.6%

NOPAT 6.3% Total Assets 8.3%

Earnings Per Share 8.4% Economic Value-Added 5.1%

Dividends Per Share 31.0% Market Value-Added 19.0%

2007 2008 2009 2010 2011

11.7% 12.0% 13.4% 13.6% 13.9%

12.1% 11.0% 14.6% 14.3% 13.4%

5.6% 9.9% 6.1% 5.1% 5.5%

1.1% 1.8% 1.8% 1.5% 1.7%

2007 2008 2009 2010 2011

2.06 2.77 2.55 2.79 3.53

0.42 0.50 0.75 0.83 1.13

2.74 3.51 3.28 3.24 3.99

2.31 2.62 2.82 2.80 2.35

Datasource: Capital IQ

Margins and Yields

Operating Margin

Per Share Metrics

Earnings

NOPAT

Free Cash Flow

Dividends

Free Cash Flow Margin

Earnings Yield

Dividend Yield

Accenture plc operates as a management consulting, technology

services, and outsourcing company. Its management consulting services

include customer relationship management, finance and performance

management, process and innovation performance, risk management,

strategy, supply chain management, and talent and organization

performance services. The company also provides various system

integration consulting services comprising enterprise solutions and

enterprise resource planning, industry and functional solutions,

information management services, cloud computing, custom solutions,

software as a service, mobility solutions, and business solutions based

Investment Thesis

ANNUALIZED 3-YEAR CAGR

Economic slowdown resulting in declining revenue growth is a

concern for many companies. Helping clients to increase efficiency is

one of ACN’s biggest strengths. Having a global footprint is essential

to take advantage of these opportunities in declining areas and

boosting growth in urbanizing and under developed markets. Despite

slow growth in Total Revenue (mostly due to contract cancellation

stemming from the 2008 recession), ACN has been able to grow EBIT,

NOPAT, and EPS during fierce economic conditions. Strong value

creation through M&A, a healthy ROIC-to-WACC spread of 35.3%, a

strong commitment to rewarding shareholders via dividends, and low

valuation provides a good long-term investment opportunity.

Accenture plc Sector: Information Technology BUYACN

-20%

-10%

0%

10%

20%

30%ACN ^SPX

-40%

-30%

-20%

-10%

0%

10%

20%

30%ACN ORCL CTSH

0

5

10

15

20

25

2006 2007 2008 2009 2010 2011

Price/Earnings Price/Free Cash Flow

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

2006 2007 2008 2009 2010 2011

EBIT Net Operating Profit After Tax

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$0

$500

$1,000

$1,500

$2,000

$2,500

2006 2007 2008 2009 2010 2011

Economic Value-Added Market Valued-Added

0%

10%

20%

30%

40%

50%

60%

2006 2007 2008 2009 2010 2011

ROA ROE ROIC

20 28

ACN DateShare

Price

PRVit Score

(vs Market)

Industry

Median

4-May-12 $62.61 90 60

95

95

ACN 25th 50th 75th % Russell

6.8% -5.3% 0.6% 4.6% 83

50.4% -3.4% 0.7% 4.8% 99

86


12.2% -1.0% 0.6% 2.3% 94

4.9% -0.3% 0.6% 2.1% 89

8.4% -1.9% 0.5% 2.5% 92

9

9


31% 36% 46% 57% 14

0.3% 2.0% 4.4% 11.7% 1

6


43% 6% 0% -10% 2

57% 54% 23% 11% 24

31% 8% 26% 45% 57

0.7 0.7 1.9 3.4 23

62

91


116% -8% 36% 126% 73

753% -7% 29% 114% 97

50


7.6 5.5 7.5 10.2 52

16.6 14.7 19.8 27.3 34

17% -13% 20% 62% 48

No part of this report may be reproduced or distributed in any form except to authorized licensees of EVA Dimensions LLC Copyright 2010 All Rights Reserved

MVA Margin

MVA Spread

V2 Wealth Multiples Valuation multiples to cash flow, earnings, EVA

EBITDAR Multiple

NOPAT Multiple

Future Growth Reliance

The PRVit Matrix: depicts a company’s PRVit score by plotting its “intrinsic” value score – what PRVit rates the firm is truly

worth based on its risk-adjusted performance, i.e., its comparative P-R score – against its actual valuation score – which

reflects the company’s current trading multiples. Companies rated “Hold” plot along the diagonal, which is where the firms’

actual valuation multiples align with their intrinsic values. “Buys” plot in the upper right green zone, which is where PRVit rates

the firms as worth more than their current share values, and “Sells” appear in the lower left red zone, where the firms’ P-R

scores fall short of their V scores. The top grid rates the firms against the entire market, and the lower one ranks them against

industry peers (which is the basis for the official “PRVit” score).

EVA Dimensions LLC l 15 Watersedge Court l Locust Valley, NY 11560 l Support Hot Line 1.888.500.3560 l [email protected]

V1 Wealth Ratios Valuation multiples to book capital (as adjusted)

EVA Margin Variability

R2 Vulnerability Leveraged, negative cash flow firms are suspect

Free Cash Flow Rate

Op Cash Gen Return

Total Debt/Total Capital

Total Debt/EBITDAR

Valuation Score (V) Lower is better

Stock Price Volatility

P2 Trend The growth rate in the firm's economic profit (its EVA)

EVA Momentum (vs Cap)

3 Year Trend (ΔEVA/Cap)

Last Quarter (ΔEVA/Cap)

Risk Score (R) Lower is better

R1 Volatility Variability in stock price and the EVA profit margin

EVA Spread (EVA/Capital)

PRVit® -- the Performance Risk Valuation investment technologyfrom EVA Dimensions LLC

PRVit® is powered by EVA® and EVA Momentum®,registered marks of EVA Dimensions LLC

ACCENTURE PLC IT ServicesPRVit Score(vs Industry)

Accenture plc operates as a management consulting, technology services, and outsourcing company. Its

management consulting services include customer relationship management, finance and performance

management, process and innovation performance, risk management, strategy, supply chain management, and

talent and organization performance services. The company also provides various system integration consulting

services comprising enterprise solutions and enterprise resource planning, industry and functional solutions,

information management services, cloud computing, custom solutions, software as a service, mobility solutions,

and business solutions based on Microsoft Windows Server and other .NET technologies; technology consulting

services consisting of IT strategy and transformation, enterprise architecture, infrastructure consulting, IT

security consulting, application portfolio optimization and renewal, digital solutions, and research and

development; IT outsourcing services, including application outsourcing services, such as application testing,

application management of enterprise-wide software programs and capacity services, and application

enhancement and development; and infrastructure outsourcing services, such as IT spend management, data

center, service desk, security and network, and workplace services. In addition, it offers business process

outsourcing services for specific business functions and/or processes comprising finance and accounting, human

resources, learning, and procurement, as well as various transaction-processing services comprising Internet

reservations, airport check-in, revenue management and accounting, crew scheduling and management, and

disruption recovery. Accenture plc primarily serves the communications, electronics, high technology, media, and

entertainment industries in the Americas, Europe, the Middle East, Africa, and the Asia Pacific. The company was

founded in 1995 and is based in Dublin, Ireland.

93ACN's outstanding performance (95th percentile vs. Russell 3000

companies), coupled with its very low risk (9th percentile), indicates a very

high intrinsic valuation is warranted (99th percentile), which compared to its

actual market valuation (62nd percentile at its $62.61 share price) makes

for a PRVit score of 90th percentile vs. the market.

ACN's PRVit score is at the 93rd percentile of all firms in its industry, which

leads to a recommendation to Buy. ACN is more attractively priced in

relation to its true value than all but a few of the stocks in its industry.

Performance Score (P) Higher is better

P1 Profitability Financial strength in generating a return on capital over the full cost

EVA Margin (EVA/Sales)

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

2/07 2/08 2/09 2/10 2/11 2/12

Sales vs. Capital

Sales Capital

0%

10%

20%

30%

40%

50%

60%

70%

2/07 2/08 2/09 2/10 2/11 2/12

ROC vs. COC

ROC COC

$0

$500

$1,000

$1,500

$2,000

$2,500

$0

$5,000

$10,000

$15,000

$20,000

$25,000

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$35,000

2/07 2/08 2/09 2/10 2/11 2/12

Market Value Added (MVA) vs. EVA

MVA EVA

0

10

20

30

40

50

60

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90

100

2/07 2/08 2/09 2/10 2/11 2/12

PRVit Scores

Vs Market Vs Industry

ACN

0

20

40

60

80

100

0 20 40 60 80 100

Intr

insic

Va

lue

Vs.

Ru

sse

ll 3

00

0

(P(9

5)-

R(9

)=9

9th

Pe

rce

nti

le)

Actual Valuation Vs. Russell 3000

(V=62nd Percentile)

ACN PRVit Score Vs Market 90

ACN

0

20

40

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80

100

0 20 40 60 80 100

Intr

insic

Va

lue

Vs.

Ind

ustr

y

(P(8

5)-

R(1

0)=

99

th P

erc

en

tile

)

Actual Valuation Vs. Industry

(V=42nd Percentile)

ACN PRVit Score Vs Industry 93

Sell 0-19

Underweight 20-39

Hold 40-59

Overweight 60-79

Buy 80-100

REPORT | NYSE: ACN

Analysts:

Chris Landqvist | Justin Pippitt | Kelli Coldiron | Wei Pi

The Washburn Student Investment Fund (SIF) uses a “Top Down” philosophy. The first step in

the process is to identify the Macro Economic environment. By analyzing the 21 Lagging,

Coincident and Leading Indicators we form a sense of where the economy has been, its current

state and where it could be heading in the future. With this information, we concentrate on which

sectors would be beneficial to include or exclude from the fund to maximize efficient use of our

capital. A synopsis of the Washburn SIF Macro Economic outlook, which was performed in

February 2012, is featured below.

Macro Economic Outlook

According to our process, the economic outlook remains weak. The slow but steady growth from

the previous year has turned stagnant, further slowing growth for the economy. As this year

continues, investors remain fearful and

global instability has increased.

Although economy was in early expansion,

the outlook points to a leveling off and a

potential decline. Based on our outlook of

the financial and business cycle, now

would be a phase where investors normally

buy into services, utilities, and financial

segments of the market. Although it is not the typical time to enter into the information

technology segment of the market, ACN, as

will be shown, is seeing increased demand in

regions of slowing economic growth. In

previous downturns, ACN has been able to

generate strong revenue growth while other

companies struggle to grow. As businesses in

the United States and Europe look to increase

their efficiency, they are turning to ACN to

provide the services necessary to survive the

economic struggle.

Recommendation: BUY Market Cap: $41.53 billion Current Price: $64.44

Sector: Information Technology Dividend Yield: 2.1% 12-month target price: $79.26

Sub-Sector: IT Consulting & Other Services P/E Ratio: 16.50 Beta: 0.81

REPORT | NYSE: ACN

Analysts:


Currently, the student investment portfolio is largely underweight in the Information Technology

sector by 10.2%. Using strong screening requirements to find a stock that fits the needs of the

student investment portfolio, (a low beta, high dividend yield, and good fundamentals) ACN was

analyzed and found to fit these

requirements well. Acquiring ACN

stock would help reduce the

underweight in the information

technology sector, while at the same

time further reducing the beta of the

overall portfolio, and providing a

strong dividend given the sector.

Company Summary

ACN is an information technology company that provides three key services. They offer global

management consulting, technology services, and outsourcing capabilities. These services are

further broken into five operating groups that consist of communications and high tech, financial

services, health and public services, products, and resources. ACN is a service based company

who provides additional personalized, hands-on support to all of its customers in order to

differentiate between competitors. Many of ACN’s top customers have ACN employees placed

on-site to support the customer’s needs. ACN’s revenue stream comes from two areas: Consulting

(51% of Total Revenues) and Outsourcing (49% of total revenues). As a global company, ACN is

widespread in its reach; located in 54 countries around the world and employing 236,000

employees that offer custom care to their clients. The company is domiciled in Ireland and traded on

the New York Stock Exchange (NYSE). ACN caters to mid-sized companies and governments,

looking to improve their processes and efficiencies. Well diversified in their revenue generation,

ACN is able to maintain a strong, balanced company and grow. In addition, ACN is investing

through M&A which has proven to generate positive revenue. With a strong brand name, global footprint

and cutting edge technology, ACN is well positioned to meet the needs of its clients seeking to expand

internationally and face the demands of an urbanizing population.

Market Profile

IDC, a market research firm sees worldwide consulting services from 2010 to 2015 to rise by a

CAGR of 4.7%. IDC believes one of ACN’s strongest performing segments, worldwide IT

outsourcing, will expand by 4.9% annually during this same period.

Other segments ACN performs in, Business and IT consulting, are also expected to expand by

7.0% and 3.5% respectively. We believe because of this, ACN is positioned well for future

growth through at least 2015.

REPORT | NYSE: ACN

Analysts:


ACN’s new bookings for 2011 totaled nearly $8 billion, led by especially strong bookings in

outsourcing. We feel that ACN’s broad technological expertise and large geographic footprint

will continue to help companies that are progressively looking for more ways to trim costs

associated with operating on a global scale.

Investment Thesis

Economic slowdown resulting in declining revenue growth is a concern for many companies.

Helping clients to increase efficiency is one of ACN’s biggest strengths. Having a global

footprint is essential to take advantage of these opportunities in declining areas and boosting

growth in urbanizing and under developed markets.

Despite slow growth in Total Revenue (mostly due to contract cancellation stemming from the

2008 recession), ACN has been able to grow EBIT, NOPAT, and EPS during fierce economic

conditions.

Strong value creation through M&A, a healthy ROIC-to-WACC spread of 35.3%, a strong

commitment to rewarding shareholders via dividends, and low valuation provides a good long-

term investment opportunity.

According to independent reports, the need for the services rendered by ACN is increasing on a

global perspective. Especially important is to highlight that two of the main revenue generating

geographical areas, the United States and Europe, is experiencing increased demand. Although

both areas are experiencing a slowdown in economic growth, companies are looking to increase

efficiencies in order to stay competitive when revenues are declining. Since this is one of ACN’s

main competencies, ACN has seen increasing orders to fulfill these needs. This is also evident in

the need for increased headcount. In 2011, ACN grew their number of employees by 16% to

meet the demand for its customers. This is an essential highlight for a company that historically

works to increase their own efficiency as well. This phenomenon corroborates the increased need

for ACN's worldwide services.

ACN meets all requirements for a BUY recommendation into the Washburn Student Investment

Fund. An additional benefit of the investment is that it decreases the current underweight in the

Information Technology sector.

Historical Analysis

ACN has positioned itself well financially. As we can see from the three year annualized

compound average growth rates, they have been able to grow both EBIT and NOPAT, despite

relatively flat revenue growth over the same period. EPS, DPS, Total Invested Capital, Total

Assets, EVA, and MVA also all saw strong growth over this same period.

REPORT | NYSE: ACN

Analysts:


The decrease in revenue for 2009 can be attributed to the adjustments companies made to cut

costs wherever possible after the beginning of the recession in 2008. At the time, ACN had a

contract arraignment with several customers that allowed them to sever contracts with little to no

penalties, which made up most of their 14.7% decrease in revenues from 2008 to 2009. Since

then, ACN has restructured its contracts to favor longer, more concrete terms. For the fiscal year

of 2011, total revenues started growing again and were up 18.3% from 2010. Outside of 2008-

2009, Net Income also made consistent small gains.

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

2006 2007 2008 2009 2010 2011

Total Revenue Net Income

The incremental improvements in operating margins have shown that management is intent on

increasing efficiencies. From 2006 to 2011, operating profit margins increased from below 10%

to nearly 15%. Analysts view this commitment to containing costs very favorably.

REPORT | NYSE: ACN

Analysts:


0%

5%

10%

15%

20%

25%

30%

2006 2007 2008 2009 2010 2011

Gross Profit Margin Operating Profit Margin

Earnings per share have increased 9 out of the past 10 years, with a 28% increase in the last year

alone. Dividends per share have increased every year for the past six years and the dividend yield

is stable at around 2%. Even though this dividend yield is low for our investment process, we

feel that ACN’s commitment to increasing dividends, combined with the fact that relatively few

other IT sector companies even pay out a dividend, makes this company more attractive.

Not only does ACN have steadily growing Earnings Per Share, but they also beat the Street

estimates regularly. As you can see below, ACN has beaten analyst expectations every quarter

for the past 5 quarters.

REPORT | NYSE: ACN

Analysts:


Estimated Range Actual Earnings

ACN currently has over $5 billion cash on hand, and a relatively large and stable Free Cash Flow

Margin of over 13%. They also have virtually no long-term debt to speak of, which along with

the large amount of cash on hand and excellent cash flows, leaves them with a lot of options to

either make investments in the company, or return profits to investors. Again, we can see clear

signs of continually improving efficiencies by looking at their net profit margins, which are

increasing despite the uneven revenue growth.

0%

2%

4%

6%

8%

10%

12%

14%

16%

2006 2007 2008 2009 2010 2011

Net Profit Margin Free Cash Flow Margin

Their large Free Cash Flows have been used to make smart investments, which can be seen in

their Total Invested Capital 3-year CAGR of 11.6%. We can demonstrate that they are investing

wisely by looking at the strong performance of their ROIC and EVA (44.2% in 2011 and a 3-

year CAGR of 5.3% respectively).

REPORT | NYSE: ACN

Analysts:


0%

10%

20%

30%

40%

50%

60%

2006 2007 2008 2009 2010 2011

ROA ROE ROIC

We see good upward trends in ACN's ROA. ROE and ROIC levels are also extraordinarily high.

Not only that, but with a WACC of 8.9%, their ROIC-to-WACC spread is increasing and rather

high at 35.3%, which shows that ACN can create a significant amount of shareholder value even

if future growth remains modest.

All of this has led to ACN’s ability to consistently generate EVA. More recently, the market has

caught on to their value, with MVA nearly doubling in the last year alone. In fact, over the last

year, the stock price has experienced a nearly 25% increase, beating the performance of the

S&P500 by nearly 22%.

SWOT and Porters Review

ACN is a company that competes in the highly competitive, price sensitive, Information

Technology business alongside several other strong players. Clients are willing to pay a premium

REPORT | NYSE: ACN

Analysts:


for establishing long term relationships with strong brand name suppliers. Although there is an

excess supply there is also high switching cost involved when going from one supplier to

another. Having a global footprint is important for the clientele that ACN serves.

The industry as a whole is very volatile and the nature of technology makes is easy for a

newcomer to enter the market fairly cheap without having to face a lot of regulation or policies.

ACN is well positioned to quickly adhere to the needs of their clients worldwide. Having secured

more “Diamond Clients” and establishing presence in “Hot Spots” they are taking advantage of

the early entrance stage of developing countries.

Although finding a skilled workforce is becoming increasingly difficult, ACN is well positioned

for M&A activity. Having a great Brand Name, strong cash deposits and zero debt allows them

to act quickly if a situation arises or new technology needs to be acquired.

SWOT

S • New contract structure • Increased need from US/EURO • No debt • Internal software solution

W • Foreign exchange loss • Domiciled in Ireland • Limited ability to protect Intellectual rights

O • Growth in emerging markets • Increased demand for out-sourcing • Global footprint satisfies demand for increased efficiency

T • Qualified workers • Decreased government spending • SAP starts competing same market segment

REPORT | NYSE: ACN

Analysts:


Porter’s Five Forces

SP • Numerous suppliers • Price sensitivity is high • Similarity in products

• Low

BP • Excess demand • High switching costs • Brand name

• Low

CR • Numerous competitors • Other strong brands • Specialized local competitors

• High

TS • Lack of uniqueness • Competition more vertical integration • High

NE • Fairly cheap • Less regulation • Nature of technology

• Medium

Model Assumptions

Our valuation analysis for ACN was conducted using conservative modeling assumptions. Our

discounted cash flow model estimates ACN’s intrinsic value at $82.85 per share for 2011,

indicating ACN is currently undervalued, even in light of conservative expectations for its future

revenue growth and cost structure.

Income Statement Inputs

Revenue Growth: Outside of the negative revenue growth of 14.8% in 2009, which was affected

by a recessionary economy and weak contracts that many customers were able to cancel, ACN

has been able to increase its revenue growth rates for the last three years. Based on ACN’s strong

exposure to its global market, cloud computing, and outsourcing, ACN has strong potential to

grow its revenue in the future. Based on extensive analysis of ACN’s prospects, we chose to

grow its revenue by 14% in 2012 and slowly taper it down to a conservative long-term growth

rate of 2% to build in a margin of safety.

Dividend Growth: ACN has a strong average dividend growth of 26.3% over the last five years.

We chose to grow dividends slightly slower at 20% for 2012 to increase the margin of safety and

then gradually tapered it down to a long-term growth rate of 3.5%.

REPORT | NYSE: ACN

Analysts:


Balance Sheet Inputs

Total Current Assets: Based on ACN’s expanding operational efficiency, it should continue to

decrease its current assets (as a percentage of sales) to 35%.

Total Debt: ACN is well positioned for M&A activity. ACN also has a strong brand name, large

cash deposits, and zero debt, which allows them to act quickly if a situation arises or new

technology needs to be acquired.

Weighted Average Cost of Capital Assumptions

A WACC of 8.9% was calculated using total debt cost of 4.5% and Cost of Equity of 8.9%. To

maintain conservatism in our model, we increased the current beta of 0.81 to an estimated beta of

0.95. We also set the long-term growth rate to a conservative 2%.

Dividend Discount Model

Maintaining the beta of 0.95 and dividend growth forecast, we calculated a per share intrinsic

value of $34.08 based off of the present value of future dividends alone. This accounts for more

than half of ACN’s current market price and reduces the risk associated with the investment.

REPORT | NYSE: ACN

Analysts:


Financial Analysis

ACN has outstanding historical performance, a strong financial position, and great exposure to

future growth areas; which are illustrated through high profitability, strong value creation, and a

wide ROIC‐to‐WACC spread.

High Profitability

ACN has been consistently growing their earnings per share every year for the last six years at a

historical average rate of 13%. Based on a conservative input of ACN’s future forecasts, we

believe ACN can grow its EPS at a rate of 6% for the next five years. Because ACN has the

ability to generate high EPS, ACN has been able to sustain its DPS at an average growth rate of

26% for the last six years. ACN should manage to grow both earnings per share and dividends

per share at sustainable levels through 2016.

REPORT | NYSE: ACN

Analysts:


Strong Value creation

Over the past six years, ACN has generated large positive free cash flow. ACN has grown its

FCF/Share at an average growth rate of 17% over the last six years. Our forecast has ACN’s

FCF/Share growing at an average annual growth rate of 5%. Historically, ACN has grown its

NOPAT at an average rate of 11%. Following the conservatism and margin of safety, we forecast

NOPAT to grow at an average yearly growth rate of 6%.

NOPAT and FCF/Share (millions)

Economic Value Added

ACN shows a strong growth in its EVA. In 2010, ACN had an EVA of $1.6 billion and has

grown its EVA by 25% to $2.1 billion in 2011. ACN has consistently grown its EVA at an

average rate of 16% for the last six years. Our forecast tightens EVA to $2.2 billion and $2.4

billion in 2012 and 2013, respectively. This slower growth is again due to our conservative

modeling assumptions.

EVA and MVA (millions)

REPORT | NYSE: ACN

Analysts:


Market Value Added

In 2010, ACN’s MVA was $31.8 billion. For 2011, this metric grew to $36.8 billion. ACN’s

MVA is projected to continue its growth at an average rate of 8% through 2016.

Value Spread: ROIC to WACC

ROIC

Historical average return on invested capital was 44.85% for ACN. In 2011, ACN generated

their return on invested capital at 44.20%. For our forecast, we continue the strong ROIC at an

average of 47.30% through 2016.

WACC

Weighted‐average cost of capital was calculated at 8.90%. As described above, the beta was increased 0.95 to maintain conservatism.

REPORT | NYSE: ACN

Analysts:


Value Spread (ROIC to WACC)

ACN’s historical average value spread was 35.95%. In 2011, ACN’s value spread was also at a

high level of 35.30%. ACN forecasted value spread averages 38.40%. Even with a conservative

valuation model, ACN displays considerable potential to further grow its value creation beyond

our forecasted ROIC‐WACC spread measure.

Intrinsic Valuation

Based on the SIF valuation model of ACN’s economic fundamentals, ACN has been

undervalued by at least 50% looking back the last five years. Our model also shows that this per

share intrinsic value will continue to grow through 2016E.

REPORT | NYSE: ACN

Analysts:


We have adjusted the ratios below to further increase our margin of safety. These adjustments

fall more in-line with industry averages and helps to not overstate intrinsic value.

Even with these conservative modeling assumptions, nearly every valuation estimate we look at

shows that ACN is undervalued. The present value of future dividends accounts for over half of

the current price of the stock alone. This mitigates a large portion of the risk in this investment.

REPORT | NYSE: ACN

Analysts:


Valuation Comparison

EVA Dimensions LLC, a New York based company that provides the industry with their

proprietary ranking system of stock via the EVA metric allows us to asses another resource to

further strengthen our conviction on a stock. Note that this is not a basis of our decision making

but merely a corroboration of the research that has already been conducted.

The PRVit score for ACN shows how they compare to the market as a whole, what the median

of the Information Technology industry is, and how they compare to the industry. Being scored

above the 90th percentile indicates that the potential value of the stock is yet to be priced in.

Looking at the EVA spread, we can see that ACN scores in the 99th percentile, which shows that

the company does not need additional capital to create value or operate their business. This ties

together well with having zero debt on their balance sheet

REPORT | NYSE: ACN

Analysts:


The low Risk Score indicates how “safe” investment is in comparison to other stocks. This again

displays the depth of fundamentals within ACN.

Looking at the EVA spread, we can see that ACN scores in the 99th percentile, which shows that

the company does not need additional capital to create value or operate their business. This ties

well together with having zero debt on their balance sheet

The low Risk Score indicates how “safe” investment is in comparison to other stocks. This again

displays the depth of fundamentals within ACN.

The Y-axis displays the intrinsic value while the X-axis displays relative valuation versus the

Industry and Market respectively. Receiving a perfect score on both axes would position a

company in the top right quadrant of the graph.

Looking at both graphs, the company scores in the 99th percentile in intrinsic value which

strengthens the fundamental assessment previously presented. The relative valuation is not as

strong, indicating that it’s currently not a great of a bargain.

REPORT | NYSE: ACN

Analysts:


ROC versus COC is diverging, another great sign for value creation that can then be passed on to

shareholders.

ACN Client Success Stories

ACN uses its breadth of industry knowledge and geographic reach to provide complex solutions

to companies all over the world. Some of their more recent success stories highlighted below:

Helped Volkswagen continue its journey to high performance by introducing new payroll

and master data auditing capabilities

Accenture helped Faurecia design, build and deploy a core SAP enterprise resource

planning (ERP) solution, as well as a set of business processes, across its worldwide

operations.

REPORT | NYSE: ACN

Analysts:


Accenture helped KLM migrate to an open source platform in the quest to reduce costs

and increase flexibility—both key enablers of high performance in the rapidly-changing,

competitive airline industry.

In response to the European parliament’s decision to include the aviation industry in the

Emission Trading Scheme (ETS), Accenture helped KLM determine the impact of new

European carbon dioxide (CO2) regulations.

Accenture worked closely with Companhia Brasileira de Alumínio (CBA) to develop,

produce and implement the Score System solution for its aluminum plant.

China National Offshore Oil Corporation worked with Accenture to implement an

enterprise resource planning (ERP) system for the company to support growth.

Recommendation Summary

ACN is one of the worldwide leaders in the competitive consulting and outsourcing sub-industry

segments. It boasts a strong balance sheet, is committed to long-term dividend growth and is

consistently beating earnings estimates. In a slow economic growth environment, their Mergers

and Acquisitions strategy had a negative impact on Free Cash Flow but a positive impact on

EVA. Based on these facts and the following, we recommend a long-term BUY for the

Washburn Student Investment Fund:

An investment in ACN secures a part of a global brand that is at the top of its industry. With increased demand for its product and a reformatted contract structure, ACN has solidified a

long-term revenue stream in this insecure economic environment.

The investment would bring a 1.8% dividend yield. Although low for our purposes, we feel it is acceptable for the Information Technology segment. Additionally, the investment would

also address the 10% underweight in this segment and mitigate some risk with a low beta of

0.81.

The company has been able to grow its operating margin the past 10 years and has a strong commitment to dividends. Recently the company launched a $5.5B stock repurchase and

dividend program. From that, $3.5B is reserved for future dividends alone.

Being debt free, ACN is well positioned to continue their successful M&A program to secure technological innovations and/or, talent acquisition without being overleveraged.

To further strengthen our commitment, we have consulted some leading, independent research institutions’ opinions regarding this stock. Industry leaders like CapitalIQ, Argus,

Standard and Poor’s, and Eva Dimensions all have a BUY recommendation on the stock and

REPORT | NYSE: ACN

Analysts:


highlight the divergence in sequential ROIC-to-WACC spread and high intrinsic value.

Readers should be aware that this is not used as a determining factor to initiate a BUY of the

position but merely a corroboration of the facts already established.

Our conservative forecast assumptions and added margin of safety will allow ACN to meet future expectations. History has shown that ACN consistently beats estimates and with an

increased beta we allow for additional margins to continue this trend.

Accenture plc ACN Sector Information Technology Stock Price $64.44 Report Date 5/6/2012

2006 2007 2008 2009 2010 2011 ASSETS 2006 2007 2008 2009 2010 2011

Total Revenue 18,228 21,453 25,314 21,577 21,551 25,507 Cash and Equivalents 3,067 3,314 3,603 4,542 4,838 5,701

Cost of Goods Sold 13,234 15,411 18,128 16,330 15,843 18,966 Short-Term Investments 353 231 20 8 3 5

Gross Profit 4,994 6,041 7,186 5,247 5,707 6,541 Total Cash & ST Invest. 3,420 3,546 3,623 4,550 4,841 5,706

SG&A Expense 3,201 3,522 4,151 3,948 4,326 4,840 Total Receivables 3,104 3,699 4,515 3,362 3,662 4,622

R&D Expense 0 0 0 0 0 0 Inventory 0 0 0 0 0 0

Dep. & Amort. 0 0 0 0 0 0 Prepaid Expenses 0 0 0 0 0 0

Other Oper. Exp. 16,435 18,934 22,279 18,684 18,626 21,960 Total Current Assets 7,191 7,971 9,159 8,991 9,564 11,471

Operating Income 1,793 2,519 3,034 2,893 2,924 3,547 Gross PPE 2,088 2,364 2,426 2,341 2,219 2,425

Interest Expense (21) (25) (23) (14) (15) (15) Accumulated Depr. (1,360) (1,556) (1,626) (1,640) (1,560) (1,640)

Other Non-Oper. Exp. (28) (22) (2) (3) (16) 17 Net PPE 728 808 800 701 660 785

EBT ex-Unusuals 1,874 2,627 3,124 2,926 2,924 3,590 Long-Term Investments 125 82 19 29 41 40

Total Unusual Exp. 50 (8) (16) (248) (10) (78) Goodwill 528 644 840 825 841 1,132

Earnings Before Tax 1,924 2,619 3,108 2,678 2,914 3,512 Total Assets 9,497 10,747 12,399 12,256 12,835 15,732

Income Tax Expense 491 896 911 740 854 959 LIABILITIES AND EQUITY

Net Income 973 1,243 1,692 1,590 1,781 2,278 Accounts Payable 856 985 1,017 717 885 949

Accrued Expenses 2,652 3,187 3,706 3,402 3,508 4,330

Diluted EPS 1.59 1.97 2.64 2.44 2.66 3.40 Short-Term Debt 2 1 5 0 0 0

Total Diluted Shares 895 863 824 787 767 742 Total Current Liab. 5,773 6,879 6,848 6,239 6,568 7,907

Dividends Per Share 0.35 0.42 0.50 0.75 0.83 1.13 Long-Term Debt 27 3 2 0 1 0

Pension Benefits 493 494 484 678 953 996

Effective Tax Rate 25.5% 34.2% 29.3% 29.3% 29.3% 27.3% Total Liabilities 6,735 7,944 9,206 8,870 9,561 11,381

Earnings Per Share 1.65 2.06 2.77 2.55 2.79 3.53 Preferred Equity 0 0 0 0 0 0

Total Common Shares 589 604 611 623 637 646 Common Stock & APIC 1,183 649 820 0 138 525

EBITDA 2,145 2,963 3,526 3,392 3,399 4,060 Retained Earnings 1,607 2,363 3,121 3,947 4,634 6,282

EBIT 1,793 2,519 3,034 2,893 2,924 3,547 Treasury Stock (870) (1,033) (1,406) (1,755) (2,524) (3,578)

EBITDAR 2,530 3,384 4,010 3,859 3,836 4,521 Total Common Equity 1,894 2,063 2,541 2,835 2,836 3,879

Free Cash Flow/Share 4.49 4.31 4.55 5.05 4.83 5.31 Total Equity 2,762 2,804 3,193 3,386 3,275 4,351

Year-end Stock Price $38.72 $36.77 $28.04 $41.84 $55.07 $64.44 Total Liab. and Equity 9,497 10,747 12,399 12,256 12,835 15,732

Historical Income Statements Historical Balance Sheets

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EBITDA EBIT

Accenture Performance Analysis. Datasource: CapitalIQ Historical Performance, Page 1 of 4 Analysts: Chris Landqvist, Justin Pippitt, Kelli Coldiron, Wei Pi

Margins 2006 2007 2008 2009 2010 2011 Relative Valuation 2006 2007 2008 2009 2010 2011

Gross Profit Margin 27.4% 28.2% 28.4% 24.3% 26.5% 25.6% Price/Earnings 23.4 17.9 10.1 16.4 19.7 18.3

Operating Profit Margin 9.8% 11.7% 12.0% 13.4% 13.6% 13.9% Price/Book 2.4 2.1 1.4 2.1 2.7 2.6

Net Profit Margin 5.3% 5.8% 6.7% 7.4% 8.3% 8.9% Price/Free Cash Flow 8.6 8.5 6.2 8.3 11.4 12.1

Free Cash Flow Margin 14.5% 12.1% 11.0% 14.6% 14.3% 13.4% Earnings Yield 4.3% 5.6% 9.9% 6.1% 5.1% 5.5%

Dividend Yield 0.9% 1.1% 1.8% 1.8% 1.5% 1.7%

Liquidity and Debt 2006 2007 2008 2009 2010 2011 Profitability 2006 2007 2008 2009 2010 2011

Current Ratio 1.25 1.16 1.34 1.44 1.46 1.45 Net Profit Margin 5.3% 5.8% 6.7% 7.4% 8.3% 8.9%

Quick Ratio 1.25 1.16 1.34 1.44 1.46 1.45 Total Asset Turnover 1.92 2.00 2.04 1.76 1.68 1.62

Days Sales Outstanding 62.15 62.94 65.11 56.87 62.03 66.14 Equity Multiplier 3.44 3.83 3.88 3.62 3.92 3.62

Inventory Turnover N/A N/A N/A N/A N/A N/A Return on Assets 10.2% 11.6% 13.6% 13.0% 13.9% 14.5%

Long-Term Debt to Equity 1.0% 0.1% 0.1% 0.0% 0.0% 0.0% Return on Equity 35.2% 44.3% 53.0% 47.0% 54.4% 52.3%

Total Debt to Assets 0.3% 0.0% 0.1% 0.0% 0.0% 0.0% Return on Invested Capital 39.4% 45.4% 51.1% 45.6% 43.4% 44.2%

Times Interest Earned 84.80 100.61 133.65 204.88 199.25 236.47

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Capital, NOPAT & FCF 2006 2007 2008 2009 2010 2011

Net Oper. Working Capital 2,662 2,842 3,395 3,784 4,108 5,044

Net Fixed Assets 728 808 800 701 660 785

Total Invested Capital 3,390 3,650 4,195 4,485 4,767 5,829

Net Oper. Profit After Tax 1,336 1,657 2,145 2,045 2,068 2,579

Free Cash Flow N/A 1,398 1,600 1,755 1,785 1,517

Compared With: NOPAT Per Share 2.27 2.74 3.51 3.28 3.24 3.99

Oracle Corporation Free Cash Flow Per Share N/A 2.31 2.62 2.82 2.80 2.35

Cognizant Technology Solutions CorporationReturn on Invested Capital 39.4% 45.4% 51.1% 45.6% 43.4% 44.2%

S&P 500 Index

Cost of Capital 2011 Weight % Cost Wgt Cost Value Creation 2006 2007 2008 2009 2010 2011

Equity Capitalization 41,528 100.0% 8.9% 8.9% Economic Value-Added 1,033 1,332 1,771 1,645 1,642 2,059

Total Debt 0 0.0% 4.5% 0.0% Market Valued-Added 15,221 22,303 22,325 17,436 20,488 37,649

Preferred Stock 0 0.0% 0.0% 0.0% PV of Future FCFs 20,831 21,292 21,591 21,762 21,919 22,357

Value of All Securities 41,528 100.0% Value of Non-Oper. Assets 3,420 3,546 3,623 4,550 4,841 5,706

Effective Tax Rate 27.3% Long-Term Growth Rate: Total Intrinsic Firm Value 24,251 24,837 25,214 26,312 26,760 28,063

Risk-Free Rate 2.27% 2.0% Intrinsic Value of Equity 24,221 24,834 25,208 26,311 26,759 28,063

Beta 0.81 Alternative Beta: Per Share Intrinsic Value $27.07 $28.77 $30.59 $33.44 $34.91 $37.81

Market Risk Premium 7.0% 0.95 Year-End Stock Price $38.72 $36.77 $28.04 $41.84 $55.07 $64.44

CAPM Cost of Equity 8.9% Over (Under) Valuation/Sh $11.65 $8.00 ($2.55) $8.40 $20.16 $26.63

Weighted Average Cost of Capital: 8.9% % Over (Under) Valued 30.1% 21.7% -9.1% 20.1% 36.6% 41.3%

30.5% 36.5% 42.2% 36.7% 34.4% 35.3%

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Over (Under) Valuation/Sh % Over (Under) Valued

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Revenues, Profits and Dividends 20.0% Liquidity and Debt 10.0%

Total Revenue 0 Current Ratio 1

EBITDA 1 Quick Ratio 1

EPS 1 Days Sales Outstanding -1

DPS 1 Inventory Turnover 1

Gross, Operating and Net Margins 15.0% Total Debt/Assets 1

Gross Profit Margin 0 Long-Term Debt/Equity 1

Operating Profit Margin 1 NOPAT, Total Invested Capital, FCF 15.0%

Net Profit Margin 1 NOPAT 1

Free Cash Flow Margin 0 Total Invested Capital 1

Relative Valuation 15.0% Free Cash Flow 0

Price/Earnings 0 Value Creation 15.0%

Price/Free Cash Flow 0 Economic Value-Added 1

Earnings Yield 0 Market Value-Added 1

Dividend Yield 1 Intrinsic Value 1

Profitability 10.0%

ROA 1 Score (max = 100%) 67.9%

ROE 1

ROIC 1

Weights 100.0%

Historical Performance Diffusion Index


ACN Accenture plc Sector Information Technology

2006 2007 2008 2009 2010 2011 Average Manual 2012E 2013E 2014E 2015E 2016E

Total Revenue 18,228 21,453 25,314 21,577 21,551 25,507 7.0% N/A 29,078 32,567 35,824 38,690 39,464

Cost of Goods Sold 13,234 15,411 18,128 16,330 15,843 18,966

Gross Profit 4,994 6,041 7,186 5,247 5,707 6,541 26.6% N/A 7,734 8,662 9,529 10,291 10,497

SG&A Expense 3,201 3,522 4,151 3,948 4,326 4,840

R&D Expense 0 0 0 0 0 0

Dep. & Amort. 0 0 0 0 0 0

Other Oper. Exp. 16,435 18,934 22,279 18,684 18,626 21,960

Operating Income 1,793 2,519 3,034 2,893 2,924 3,547 12.9% N/A 3,758 4,209 4,629 5,000 5,100

Net Interest Expense 108 130 92 36 15 26

Other Non-Oper. Exp. (28) (22) (2) (3) (16) 17

EBT ex-Unusuals 1,874 2,627 3,124 2,926 2,924 3,590

Total Unusual Exp. 50 (8) (16) (248) (10) (78)

Earnings Before Tax 1,924 2,619 3,108 2,678 2,914 3,512

Income Tax Expense 491 896 911 740 854 959

Net Income 973 1,243 1,692 1,590 1,781 2,278 7.4% N/A 2,154 2,413 2,654 2,866 2,923

Basic EPS 1.65 2.06 2.77 2.55 2.79 3.53 3.28 3.60 3.89 4.13 4.13

Total Common Shares 589 604 611 623 637 646 1.8% N/A 658 670 682 695 708

Dividends Per Share 0.35 0.42 0.50 0.75 0.83 1.13 26.3% N/A 1.35 1.59 1.85 2.11 2.18

2007 2008 2009 2010 2011 Average Manual 2012E 2013E 2014E 2015E 2016E

1. Revenue Growth 17.7% 18.0% -14.8% -0.1% 18.4% 7.0% 14.0% 12.0% 10.0% 8.0% 2.0%

2. Gross Margin 28.2% 28.4% 24.3% 26.5% 25.6% 26.6%

3. Operating Margin 11.7% 12.0% 13.4% 13.6% 13.9% 12.9%

4. Net Margin 5.8% 6.7% 7.4% 8.3% 8.9% 7.4%

5. Common Shares Growth 2.6% 1.1% 2.0% 2.3% 1.3% 1.8%

6. Dividend Growth 20.0% 19.0% 50.0% 10.0% 36.4% 26.3% 20.0% 18.0% 16.0% 14.0% 3.5%

4. Net Income 5. Total Common Shares 6. Dividends Per Share

Historical Growth and Margins Forecast Defaults to Historical Avg. User Can Enter 1 Manual Avg. or Year-by-Year Values

1. Total Revenue 2. Gross Profit 3. Operating Income

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Accenture Performance Analysis. Datasource: CapitalIQ Income Statement Forecast, Page 1 of 1 Analysts: Chris Landqvist, Justin Pippitt, Kelli Coldiron, Wei Pi

ACN Accenture plc Sector Information Technology

ASSETS 2006 2007 2008 2009 2010 2011 Average Manual 2012E 2013E 2014E 2015E 2016E

Cash and Equivalents 3,067 3,314 3,603 4,542 4,838 5,701 19.1% N/A 5,556 6,223 6,845 7,392 7,540

Short-Term Investments 353 231 20 8 3 5

Total Cash & ST Invest. 3,420 3,546 3,623 4,550 4,841 5,706

Total Receivables 3,104 3,699 4,515 3,362 3,662 4,622 17.2% N/A 4,988 5,587 6,146 6,637 6,770

Inventory 0 0 0 0 0 0 0.0% N/A 0 0 0 0 0

Prepaid Expenses 0 0 0 0 0 0

Total Current Assets 7,191 7,971 9,159 8,991 9,564 11,471 40.9% 35.0% 10,177 11,399 12,538 13,542 13,812

Gross PPE 2,088 2,364 2,426 2,341 2,219 2,425

Accumulated Depr. (1,360) (1,556) (1,626) (1,640) (1,560) (1,640)

Net PPE 728 808 800 701 660 785 3.3% N/A 949 1,063 1,169 1,263 1,288

Long-Term Investments 125 82 19 29 41 40

Goodwill 528 644 840 825 841 1,132

Total Assets 9,497 10,747 12,399 12,256 12,835 15,732 55.4% N/A 16,116 18,050 19,854 21,443 21,872

LIABILITIES AND EQUITY 3,508 4,172 4,723 4,120 4,393 5,279

Accounts Payable 856 985 1,017 717 885 949 Note: Forecasting Payables + Accruals together in row 19 below

Accrued Expenses 2,652 3,187 3,706 3,402 3,508 4,330 19.7% N/A 5,716 6,402 7,042 7,605 7,757

Short-Term Debt 2 1 5 0 0 0

Total Current Liabilities 5,773 6,879 6,848 6,239 6,568 7,907 29.9% N/A 8,695 9,738 10,712 11,569 11,800

Long-Term Debt 27 3 2 0 1 0 0.0% 0.0% 0 0 0 0 0

Pension Benefits 493 494 484 678 953 996 29 3 7 0 1 0

Total Liabilities 6,735 7,944 9,206 8,870 9,561 11,381 Note: Forecasting ST Debt + LT Debt together in row 22 above

Preferred Equity 0 0 0 0 0 0

Common Stock & APIC 1,183 649 820 0 138 525

Retained Earnings 1,607 2,363 3,121 3,947 4,634 6,282

Treasury Stock (870) (1,033) (1,406) (1,755) (2,524) (3,578)

Total Common Equity 1,894 2,063 2,541 2,835 2,836 3,879

Total Equity 2,762 2,804 3,193 3,386 3,275 4,351 14.7% N/A 4,282 4,796 5,275 5,697 5,811

Total Liab. and Equity 9,497 10,747 12,399 12,256 12,835 15,732


1. Cash and Equivalents 15.4% 14.2% 21.0% 22.5% 22.4% 19.1%

2. Total Receivables 17.2% 17.8% 15.6% 17.0% 18.1% 17.2%

3. Inventory 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Percent of Sales Forecast Defaults to Historical Avg. User Can Enter 1 Manual Avg. or Year-by-Year Values

2. Total Receivables1. Cash and Equivalents 3. Inventory

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Accenture Performance Analysis. Datasource: CapitalIQ Balance Sheet Forecast, Page 1 of 2 Analysts: Chris Landqvist, Justin Pippitt, Kelli Coldiron, Wei Pi


4. Total Current Assets 37.2% 36.2% 41.7% 44.4% 45.0% 40.9% 35.0%

5. Net PPE 3.8% 3.2% 3.2% 3.1% 3.1% 3.3%

6. Total Assets 50.1% 49.0% 56.8% 59.6% 61.7% 55.4%

7. Payables and Accruals 19.4% 18.7% 19.1% 20.4% 20.7% 19.7%

8. Total Current Liabilities 32.1% 27.1% 28.9% 30.5% 31.0% 29.9%

9. Total Debt 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

10. Total Equity 13.1% 12.6% 15.7% 15.2% 17.1% 14.7%

7. Payables and Accruals 8. Total Current Liabilities 9. Total Debt

10. Total Equity

4. Total Current Assets 5. Net PPE 6. Total Assets

Percent of Sales Forecast Defaults to Historical Avg. User Can Enter 1 Manual Avg. or Year-by-Year Values

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Accenture Performance Analysis. Datasource: CapitalIQ Balance Sheet Forecast, Page 2 of 2 Analysts: Chris Landqvist, Justin Pippitt, Kelli Coldiron, Wei Pi

ACN Accenture plc Sector Information Technology Report Date 5/6/2012 2006

2006 2007 2008 2009 2010 2011 2012E 2013E 2014E 2015E 2016E

Total Revenue 18,228 21,453 25,314 21,577 21,551 25,507 29,078 32,567 35,824 38,690 39,464

Gross Profit 4,994 6,041 7,186 5,247 5,707 6,541 7,734 8,662 9,529 10,291 10,497

Operating Income 1,793 2,519 3,034 2,893 2,924 3,547 3,758 4,209 4,629 5,000 5,100

Net Income 973 1,243 1,692 1,590 1,781 2,278 2,154 2,413 2,654 2,866 2,923

Retained Earnings 1,607 2,363 3,121 3,947 4,634 6,282 7,548 8,893 10,287 11,689 13,070

Total Common Shares 589 604 611 623 637 646 658 670 682 695 708

Total Diluted Shares 895 863 824 787 767 742 756 770 784 799 813

Earnings Per Share $1.65 $2.06 $2.77 $2.55 $2.79 $3.53 $3.28 $3.60 $3.89 $4.13 $4.13

Dividends Per Share $0.35 $0.42 $0.50 $0.75 $0.83 $1.13 $1.35 $1.59 $1.85 $2.11 $2.18

2006 2007 2008 2009 2010 2011 2012E 2013E 2014E 2015E 2016E

Cash and Equivalents 3,067 3,314 3,603 4,542 4,838 5,701 5,556 6,223 6,845 7,392 7,540

Total Receivables 3,104 3,699 4,515 3,362 3,662 4,622 4,988 5,587 6,146 6,637 6,770

Inventory 0 0 0 0 0 0 0 0 0 0 0

Total Current Assets 7,191 7,971 9,159 8,991 9,564 11,471 10,177 11,399 12,538 13,542 13,812

Net PPE 728 808 800 701 660 785 949 1,063 1,169 1,263 1,288

Total Assets 9,497 10,747 12,399 12,256 12,835 15,732 16,116 18,050 19,854 21,443 21,872

Payables and Accruals 3,508 4,172 4,723 4,120 4,393 5,279 5,716 6,402 7,042 7,605 7,757

Total Current Liabilities 5,773 6,879 6,848 6,239 6,568 7,907 8,695 9,738 10,712 11,569 11,800

Total Debt 29 3 7 0 1 0 0 0 0 0 0

Total Equity 2,762 2,804 3,193 3,386 3,275 4,351 4,282 4,796 5,275 5,697 5,811

Historical Income Statement Highlights Forecasted Income Statement Highlights

Historical Balance Sheet Highlights Forecasted Balance Sheet Highlights

$0 $5,000

$10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000 $45,000

Total Revenue

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

Net Income

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

Total Current Assets Cash and Equivalents

0

5

10

15

20

25

30

35

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Total Equity Total Debt

$0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00 $4.50

Earnings Per Share Dividends Per Share

$0

$5,000

$10,000

$15,000

$20,000

$25,000

Total Assets Net PPE

Accenture Performance Analysis. Datasource: CapitalIQ Financial Analysis & Valuation, Page 1 of 5 Analysts: Chris Landqvist, Justin Pippitt, Kelli Coldiron, Wei Pi

Margins 2006 2007 2008 2009 2010 2011 2012E 2013E 2014E 2015E 2016E

Gross Profit Margin 27.4% 28.2% 28.4% 24.3% 26.5% 25.6% 26.6% 26.6% 26.6% 26.6% 26.6%

Operating Profit Margin 9.8% 11.7% 12.0% 13.4% 13.6% 13.9% 12.9% 12.9% 12.9% 12.9% 12.9%

Net Profit Margin 5.3% 5.8% 6.7% 7.4% 8.3% 8.9% 7.4% 7.4% 7.4% 7.4% 7.4%

Free Cash Flow Margin 14.5% 6.5% 6.3% 8.1% 8.3% 5.9% 9.6% 7.3% 7.6% 7.9% 9.0%

Liquidity and Debt 2006 2007 2008 2009 2010 2011 2012E 2013E 2014E 2015E 2016E

Days Sales Outstanding 62.15 62.94 65.11 56.87 62.03 66.14 62.62 62.62 62.62 62.62 62.62

Inventory Turnover N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A

Total Debt to Equity 1.1% 0.1% 0.2% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Total Debt to Assets 0.3% 0.0% 0.1% 0.0% 0.0% N/A N/A N/A N/A N/A N/A

Profitability 2006 2007 2008 2009 2010 2011 2012E 2013E 2014E 2015E 2016E

Total Asset Turnover 1.92 2.00 2.04 1.76 1.68 1.62 1.80 1.80 1.80 1.80 1.80

Equity Multiplier 3.44 3.83 3.88 3.62 3.92 3.62 3.76 3.76 3.76 3.76 3.76

Return on Assets 10.2% 11.6% 13.6% 13.0% 13.9% 14.5% 13.4% 13.4% 13.4% 13.4% 13.4%

Return on Equity 35.2% 44.3% 53.0% 47.0% 54.4% 52.3% 50.3% 50.3% 50.3% 50.3% 50.3%

Return on Capital 39.4% 45.4% 51.1% 45.6% 43.4% 44.2% 47.3% 47.3% 47.3% 47.3% 47.3%

3.10 3.20 3.30 3.40 3.50 3.60 3.70 3.80 3.90 4.00

0.0

0.5

1.0

1.5

2.0

2.5

Total Asset Turnover Equity Multiplier

0

0

0

1

1

1

52

54

56

58

60

62

64

66

68

Days Sales Outstanding Inventory Turnover

0%

5%

10%

15%

20%

25%

30%


0%

2%

4%

6%

8%

10%

12%

14%

16%


0%

0%

0%

1%

1%

1%

1%

Total Debt to Equity Total Debt to Assets

0%

10%

20%

30%

40%

50%

60%

Return on Equity Return on Assets

0%

10%

20%

30%

40%

50%

60%

Return on Equity Return on Capital


Capital, NOPAT & FCF 2006 2007 2008 2009 2010 2011 2012E 2013E 2014E 2015E 2016E

NOWC 2,662 2,842 3,395 3,784 4,108 5,044 4,829 5,408 5,949 6,425 6,553

Net Fixed Assets 728 808 800 701 660 785 949 1,063 1,169 1,263 1,288

Total Invested Capital 3,390 3,650 4,195 4,485 4,767 5,829 5,777 6,471 7,118 7,687 7,841

Effective Tax Rate 25.5% 34.2% 29.3% 29.3% 29.3% 27.3%

NOPAT 1,336 1,657 2,145 2,045 2,068 2,579 2,732 3,060 3,366 3,635 3,708

Free Cash Flow N/A 1,398 1,600 1,755 1,785 1,517 2,783 2,366 2,719 3,065 3,554

NOPAT Per Share 2.27 2.74 3.51 3.28 3.24 3.99 4.15 4.57 4.93 5.23 5.24

FCF/Share N/A 2.31 2.62 2.82 2.80 2.35 4.23 3.53 3.99 4.41 5.02

Return on Capital 39.4% 45.4% 51.1% 45.6% 43.4% 44.2% 47.3% 47.3% 47.3% 47.3% 47.3%

Intrinsic Value of FCFs Valuation Model

Value Creation 2006 2007 2008 2009 2010 2011 2012E 2013E 2014E 2015E 2016E

Economic Value-Added 1,033 1,332 1,771 1,645 1,642 2,059 2,216 2,482 2,731 2,949 3,008

Market Valued-Added 20,048 19,410 13,938 22,680 31,814 37,254 47,840 49,781 51,519 53,036 54,097

PV of Future FCFs 35,800 37,597 39,351 41,106 42,989 45,307 46,566 48,354 49,950 51,341 52,368

Value of Non-Oper. Assets 3,067 3,314 3,603 4,542 4,838 5,701 5,556 6,223 6,845 7,392 7,540

Total Intrinsic Firm Value 38,867 40,911 42,954 45,648 47,827 51,008 52,122 54,577 56,795 58,733 59,908

Intrinsic Value of Equity 38,838 40,907 42,947 45,648 47,826 51,008 52,122 54,577 56,795 58,733 59,908

Per Share Intrinsic Value $65.93 $67.71 $70.30 $73.27 $75.06 $79.00 $79.26 $81.49 $83.26 $84.54 $84.67

Year-End Stock Price $38.72 $36.77 $28.04 $41.84 $55.07 $64.44

Over (Under) Valuation/Sh ($27.21) ($30.94) ($42.26) ($31.43) ($19.99) ($14.56)

% Over (Under) Valued -70.3% -84.2% -150.7% -75.1% -36.3% -22.6%

Cost of Capital 2011 Weight % Cost Wgt Cost

Equity Capitalization 41,528 100.0% 8.9% 8.9%

Total Debt 0 0.0% 4.5% 0.0%

Preferred Stock 0 0.0% 0.0% 0.0%

Value of All Securities 41,528 100.0%

Effective Tax Rate 27.3% Long-Term Growth Rate:

Risk-Free Rate 2.27% 2.0%

5-Yr Beta 0.81 Alternative Beta:

Market Risk Premium 7.0% 0.95

CAPM Cost of Equity 8.9%

8.9%

(Tax rate from last historical year used in forecasts)

Weighted Average Cost of Capital:

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500


$0 $10 $20 $30 $40 $50 $60 $70 $80 $90

Year-End Stock Price Per Share Intrinsic Value

-160%

-140%

-120%

-100%

-80%

-60%

-40%

-20%

0%

($45) ($40) ($35) ($30) ($25) ($20) ($15) ($10)

($5) $0

2006 2007 2008 2009 2010 2011

Over (Under) Valuation/Sh % Over (Under) Valued

$0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000

Total Invested Capital Net Fixed Assets

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

NOPAT Free Cash Flow


Relative Valuation 2006 2007 2008 2009 2010 2011 2012E 2013E 2014E 2015E 2016E

Stock Price/Intr. Value $38.72 $36.77 $28.04 $41.84 $55.07 $64.44 $79.26 $81.49 $83.26 $84.54 $84.67

Price to Earnings 23.4 17.9 10.1 16.4 19.7 18.3 24.2 22.6 21.4 20.5 20.5

Price to Free Cash Flow N/A 15.9 10.7 14.8 19.7 27.4 18.7 23.1 20.9 19.2 16.9

Price to Sales 1.3 1.0 0.7 1.2 1.6 1.6 1.8 1.7 1.6 1.5 1.5

Price to Book 2.4 2.1 1.4 2.1 2.7 2.6 3.2 3.0 2.9 2.7 2.7

Earnings Yield 4.3% 5.6% 9.9% 6.1% 5.1% 5.5% 4.1% 4.4% 4.7% 4.9% 4.9%

Dividend Yield 0.9% 1.1% 1.8% 1.8% 1.5% 1.7% 1.7% 2.0% 2.2% 2.5% 2.6%

Free Cash Flow Yield N/A 6.3% 9.3% 6.7% 5.1% 3.6% 5.3% 4.3% 4.8% 5.2% 5.9%

Relative Valuation Pricing Model Adjust 2012 Intrinsic Dividend Discount Valuation Model

2012E Ratio Ratio Ratio Metric Value ACN Accenture plc

Price to Earnings 24.2 21.0 $3.28 $68.79 20.0% 18.0% 16.0% 14.0% 3.5%

Price to Free Cash Flow 18.7 16.5 $4.23 $69.84 2006 2007 2008 2009 2010 2011 2012E 2013E 2014E 2015E 2016E

Price to Sales 1.8 1.7 $44.22 $75.17 $0.35 $0.42 $0.50 $0.75 $0.83 $1.13 $1.35 $1.59 $1.85 $2.11 $2.18

Price to Book 3.2 2.5 $24.51 $61.27

1-Yr Div Growth 36.4% PV Dividends 1-4 $5.51 Dividend Yeld 1.7%

2012E 3-Yr Div Growth 31.0% PV Perpetual Div. $28.57

Current Price $64.44 5-Yr Div Growth 26.3% Intrinsic Value $34.08 If Purchased For: $64.44

PV of Free Cash Flows $79.26 Risk-Free Rate 2.27% Current Price $64.44 Expected Return = -7.9%

Dividend Discount Model $34.08 5-Yr Beta 0.81 ($64.44) $1.35 $1.59 $1.85 $42.32 $40.21

Price to Earnings $68.79 Market Premium 7.0% Analyst Notes:

Price to Free Cash Flow $69.84 Required Return 8.9% Based on a current dividend of $1.13, expected growth as shown above and an equity required

Price to Sales $75.17 Alternative Beta 0.95 return of 8.9%, ACN is worth $34.08 per share, vs. a current price of $64.44.

Price to Book $61.27

Compared With: Compared With:

Oracle Corporation S&P 500 Index

Cognizant Technology Solutions Corporation

Expected Dividend Growth Rates

Intrinsic Value Estimates vs. Current Price

May 6, 2012

Annual Dividend

0

5

10

15

20

25

30

Price to Earnings Price to Free Cash Flow

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Price to Sales Price to Book

0%

2%

4%

6%

8%

10%

12%

Earnings Yield Dividend Yield

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

Current Price

PV of Free Cash Flows

Dividend Discount

Model

Price to Earnings

Price to Free Cash Flow

Price to Sales

Price to Book

Intrinsic Value Estimates vs. Current Price

-40%

-30%

-20%

-10%

0%

10%

20%

30% ACN ORCL CTSH

-20%

-10%

0%

10%

20%

30% ACN ^SPX


Piotroski Financial Fitness Scorecard (10-point scale) 2007 2008 2009 2010 2011 2012E 2013E 2014E 2015E 2016E

Positive Net Income 1 1 1 1 1 1 1 1 1 1

Positive Free Cash Flow 1 1 1 1 1 1 1 1 1 1

Growing ROA (% change NI > % change TA) 1 1 0 1 1 0 0 0 0 0

Earnings Quality (Operating Income > Net Income) 1 1 1 1 1 1 1 1 1 1

Total Assets Growing Faster Than Total Liabilities 0 1 1 0 1 0 0 1 0 0

Increasing Liquidity (Current Ratio) 0 1 1 1 1 0 0 0 0 0

% Change Shares Outstanding (Diluted) < +2.0% 0 0 0 0 0 0 0 0 0 0

Expanding Gross Margin 1 1 0 1 0 1 0 0 0 0

Asset Turnover (% change sales > % change assets) 1 1 0 0 0 1 0 0 1 0

Total Liabilities to Operating Cash Flow (EBIT) < 4.0 1 1 1 1 1 1 1 1 1 1

Piotroski Score 7 9 6 7 7 6 4 5 5 4

Altman Probability of Bankruptcy Z-Score Weight 2007 2008 2009 2010 2011 2012E 2013E 2014E 2015E 2016E

(Current Assets-Current Liabilities)/Total Assets 1.200 0.1219 0.2237 0.2694 0.2801 0.2719 0.1104 0.1104 0.1104 0.1104 0.1104

Retained Earnings/Total Assets 1.400 0.2094 0.2668 0.3565 0.4305 0.4124 0.5457 0.5854 0.6271 0.6716 0.7482

Earnings Before Interest & Tax/Total Assets 3.300 0.7735 0.8077 0.7790 0.7519 0.7440 0.7695 0.7695 0.7695 0.7695 0.7695

Market Value Equity/Total Liabilities 0.600 1.6779 1.1165 1.7633 2.2021 2.1934 2.6427 2.4707 2.3374 2.2381 2.2381

Sales/Total Assets 0.999 1.9941 2.0396 1.7588 1.6773 1.6198 1.8025 1.8025 1.8025 1.8025 1.8025

Altman Score 4.78 4.45 4.93 5.34 5.24 5.87 5.74 5.65 5.59 5.67

The interpretation for the Altman Score is: Safe Zone = Z > 2.9, Grey Zone = 1.23 < Z < 2.9, Distress Zone = Z < 1.23

0

2

4

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8

10

Piotroski Financial Fitness Scorecard (10-pt scale)

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Altman Probability of Bankruptcy Z-Score


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