Accenture (ACN)

Total return at 5 years: 13.3%/year = 10.0% appreciation + 3.3% dividend. The target price ($346) is ex-dividend; the $44 in dividends collected over 5 years are added separately.

By both methods, the value today (DCF $457 · Multiples $316) exceeds the market price ($215).

Today — fairly valued: at $215 trades ~32.0% below its value discounted to today (~$316); the discount is positive but does not reach the margin of safety we require (≥38%).

At 5 years — Infravalorado: the target price ($346) plus dividends yield above the required average return (10%) — the business compounds.

The bridge: the return at 5 years exceeds the risk-free rate (4.5%) — but the discount does not reach the required margin of safety (≥38%). To require a 15% annual return, it would need to be bought at ~$201.

Educational / informational. Does not constitute investment advice.

The inverse approach: instead of projecting growth to obtain the value, the market price ($215) is taken as given and it solves for what annual owner-earnings growth would need to hold for 5 years for the present value —at the method's rate (4.5%, no-growth terminal)— to equal that price. It is the disconfirmation test: the expectations the price already pays for, contrasted against the method's projection.

The market discounts less growth (-8.8%/year) than we project (8.0%/year) → if the base case holds, there is margin: perception is more pessimistic than the estimated reality.

That growth implies ~$5.5 bn of owner earnings in year 5 (vs ~$12.8 bn of our base case). It recalculates if the DCF assumptions are edited.

Year-by-year projection of the selected scenario. From each year, two versions of the flow are derived: growth FCF (operating flow − total capex, the cash surplus) and maintenance FCF (the owner earnings: what the business yields if it only sustains its capacity). Cash accumulates the retained surplus —what is not returned as dividend or buyback—, so that EV falls and multiples compress going forward. The valuation is done on Resultado operativo (EV/EBIT). In edit mode, revenue, margins, capex, and exit multiples can be adjusted.

Year 0 (TTM, closing 31-May-2026) falls in a window that carries two non-recurring business optimisation charges: US$615M in Q4 FY25 (severance from talent rotation plus asset impairment from the divestiture of two acquisitions) and US$308M in Q1 FY26 (severance), both within the last four quarters. The reported GAAP operating margin for the TTM (14.5%) is depressed by this; the adjusted operating margin the company itself guides for FY26 (15.7%-15.9%) is the correct anchor for year 0, and from there a normalised operating margin of ~15.75% and a net margin of ~11.6% are derived for the starting point — stated explicitly, not a 'typical' figure (it is rebuilt by adding back the US$922.5M of pre-tax charges from the two windows and checking against the company's own guided range). Year 1 growth is anchored to the guidance in force from the 18-Jun-2026 release (8-K, Q3 FY26): 3%-4% local-currency growth for the full FY26, with a +2% currency tailwind already stated by the company, giving reported dollar growth of roughly 5.5% — the 6.7% of the reported TTM is not extrapolated, since it includes favourable comparisons in particular quarters. From there the path decelerates smoothly (R3) towards ~4.6% at year 5, a durable rate consistent with an already mature large-scale consultancy (the 3-6% consumer staples and utilities band of §5 R2), without crediting in advance the acceleration in AI demand that the favourable scenario does recognise. The base multiple (12.5× on operating income) sits at the midpoint of the technology services band, from 11× to 14×, on the 33% return on capital (well above the 10% hurdle) and the wide moat of stable direction, but no higher because terminal growth is modest. It is valued at the enterprise level, so the US$10.2 billion of cash and short-term investments and the US$5.1 billion of financial debt enter the bridge. Net share buybacks are material and sustained (from 642.8M in FY22 to 615.6M in the most recent quarter, at a more aggressive recent pace: US$8.2bn returned to shareholders so far in FY26) — modelled through the capital allocation cascade anchored to the real payout (fcfLtm=US$12.58bn, buybackLtm=US$5.67bn of real TTM flow), so that accumulated cash reflects only genuine retained surplus and does not double-count cash already returned through dividends and buybacks. The tax rate (23.7%) is the real effective TTM rate from XBRL.

Today's elevated multiple is the price of growth: if the business grows, the entry point cheapens on its own going forward (EV falls as cash increases). The exit multiple at 3 years is higher than the terminal at 5 years —at 3 years there is more growth still ahead—, so the value curve shows whether value creation is concentrated in the early or the later years. The required return is applied to the base scenario.

They are valued separately, with their own rationale, and are not incorporated into the base or the verdict (they are excess return). When assigning them value — in Editmode —, the total with optionalities updates live, without moving the base.

The verdict, the base CAGR, and the margin of safety are always calculated on the base; optionalities do not alter them (with optionalities at $0 they do not move).

Each card fixes a required annual return and answers: if the business is worth $346 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $215, the margin of safety is how much cheaper the market is than that maximum. The three thresholds: 4% covers inflation (the floor), 10% is the long-term average return, and 15% is the level of a great investment.

With a target price of $346 in 5 years plus $44 of dividends collected (the dividend adds to the return, not to the price) and a required return of 4.5% annually, the maximum to pay today is $316. Against the current market price ($215), the margin of safety is 32.0% (trades below the maximum → there is margin) and the total return at that price would be 13.3% annually.

• Multiple within band. 16.5x normalized net income, within the it-services band (14x-19x) and above the midpoint.
• Discount from price pullback. The stock's decline was not accompanied by a guidance cut that fully justifies it.
• Sensitivity to sector re-rating. The re-rating depends on the market reversing its AI fears across the whole industry, not just Accenture.
• Implied return. The base case implies an annual +13% at the current market price, above the 15% hurdle.

Each margin over sales, year by year: historical (solid line) → projection (dotted).

• ✓ ROIC exceeds the cost of capital (~10%)
• ✓ CFROIC backs up the ROIC (114%, cash vs. accruals)
• ✓ Healthy balance sheet (low corporate debt)
• ✓ Durable competitive moat (multiple advantages)

• Return on capital. ROIC near 30%, well above the 10% bar, with moderate invested capital.
• Cash generation. Operating cash flow consistently above net income, minimal capex relative to D&A.
• Reinvestment runway. Growth is financed mostly with talent and bolt-on acquisitions, not fixed assets.
• Stock-based compensation. SBC is material but moderate relative to revenue; already expensed in the operating income on which it is valued.

Annual levels from the official filing (10-K); the % over each bar is the year-over-year (YoY) growth vs the prior year.

Accenture does not break out volume × price drivers by business line in its MD&A (it does not report cases, units, or clients granularly). The available operating indicators are headcount, utilization rate, voluntary turnover, and quarterly new bookings, which together give a reading of delivery capacity and future demand without substituting for an explicit volume-and-price breakdown.

The % are the annual (year-over-year) growth: each year —historical and projected— vs the prior one; the TTM (trailing 12m) vs the TTM of a year ago, to avoid overlapping windows. The historicals are exact figures from the official filings; the projected years come from the year-by-year model (the intermediate years without their own series are interpolated between the anchors). The projected columns (+1y…+5y) are 12-month windows counted from the TTM close (31-may-2026): the projection starts from the most recently reported data, not the fiscal year. The projected base is realistic and unbiased — the risk discount is applied at the end, via the required return. The rationale for each metric is in the (i).

• Recent growth. 6.7% reported TTM, with FY26 guidance of 3%-4% local currency.
• Bookings backlog. New quarterly bookings of ~US$19bn, with 104 bookings of US$100M+ so far in FY26.
• Deceleration risk from AI. Utilization could fall if AI replaces billable hours faster than new projects are captured.
• Exposure to US public spending. The federal business (~15% of Americas) faces a ~1% headwind already built into guidance.

• Unmatched scale. The only company, per the filing, with the full range of services at this global scale.
• Decade-long client relationships. 195 of the top 200 clients have been on board for 10+ years.
• Exposure to AI disruption. The billable-hours business itself can be replaced by the technology it sells.
• Geographic and industry diversification. Revenue spread across three geographies and five industry groups, without excessive concentration.
• Delivery concentration in two countries. India and the Philippines hold the largest delivery capacity, a point of geopolitical exposure.

Not all debt is equal: only the structural needs refinancing; the rest is operational (self-liquidating).

Structural debt is what is exposed to the contraction phase of the cycle; operational debt (leases, matched funding) self-liquidates with the business.

• ✓Leverage (net debt / EBITDA)Net cash $5 bn
• ✓Interest coverage (EBIT / interest)43.3x
• –Liquidity (current ratio)no data
• ✓Cash quality (CFROIC vs ROIC)CFROIC backs 114% of ROIC
• ✓Value creation (ROIC − 10% bar)+23pp
• ✓Malinvestment test (capex vs incremental ROIC)Capex/D&A 0.3x — no over-investment
• !Float / working capitalConsumes cash $0.8 bn (positive WC)
• ✓Dilution (SBC % of revenue + shares)SBC 2.9% of revenue

A traffic-light interpreted by the method (not generic): float (negative WC) adds up, capex is judged by incremental ROIC (malinvestment test), and a lender is not subjected to corporate solvency. The (i) shows the derivation of each number.

• Net cash position. Cash and short-term investments (US$10,170 million) exceed total debt (US$5,140 million).
• Low leverage. Long-term debt modest relative to the size of the business, with no material refinancing pressure.
• Operating liquidity. TTM operating cash flow of US$13,180 million comfortably covers capex, dividend, and buybacks.
• Non-controlling interest liabilities. Material non-controlling interest in Avanade and Accenture Canada Holdings, with limited dilution of results.

Who owns the shares — the alignment and whether there is a controlling shareholder.

• CEO track record. Julie Sweet has 15 years at the company and five as CEO, with prior internal leadership roles.
• Capital allocation. Returns the vast majority of free cash flow via dividend and buybacks, with disciplined bolt-on M&A.
• No controlling shareholder. No founding family or control block; institutional float dominates, alignment via compensation.
• Transparency on one-offs. The company explicitly reconciles the business optimization charges against adjusted results.

• Motivated sellers: two non-recurring business optimization charges within the TTM window (US$615M in 4Q FY25 and US$308M in 1Q FY26) depress the reported GAAP margin and headline earnings, even though the adjusted margin the company guides to continues to expand.
• Missing buyers / sector panic: the market is punishing the entire consulting/IT-services industry over fears that generative AI will reduce billable hours, a real risk but one the company itself is capturing as an AI-led reinvention opportunity.
• Media noise: coverage framing the stock's decline as a strategic mistake with no single identified catalyst beyond structural AI fears — FY26 revenue and earnings-per-share guidance was not cut in the most recent communication.

The search for a single catalyst did not find an announcement of cut guidance with specific figures; the decline appears gradual throughout 2026, more tied to the sector-wide re-rating from AI fears than to a single identifiable event — this absence of a single catalyst is explicitly declared.

The annual return (CAGR at 5 years) in each scenario, with the total period return below — the margin of safety made visual: upside range wide, downside range narrow.

Even in the bear scenario, the return holds at +7%/year (+38% total): the margin of safety protects the downside. The bull (+18%/year, +126% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• AI disruption. The most cited structural risk: replacement of billable hours by AI tools.
• Geopolitical delivery risk. Personnel concentrated in India and the Philippines, with no insurance coverage for disruptive events.
• International tax risk. Dependence on the US-Ireland tax treaty and added complexity from the global minimum tax (Pillar Two).
• Execution risk on large contracts. Multi-year transformation contracts depend on effort/cost estimates that can fail.
• Cybersecurity and data risk. Legal, reputational, and financial exposure from failures protecting client data.

Each thinker's analytical framework applied to our data.

• Buffett / Graham Quality + margin of safety

  A wide moat and ROIC 33% above the 10% bar, but the margin is limited (+32%) → excellent business at a fair price.

• Peter Lynch Growth at a reasonable price (GARP)

  A fast grower growing 8% at a multiple/growth of 1.4 → reasonable for its growth.

• Joel Greenblatt Cheap and high-return (Magic Formula)

  Earnings yield 9% (EBIT/EV) + ROIC 33% → makes the Magic Formula.

• Howard Marks Perception vs reality + cycle

  The price discounts -9% vs our 8%: perception is more pessimistic than reality, with an identified source of the discount.

• Seth Klarman Capital protection (bear scenario)

  Bear-scenario floor +3%/yr, bull-scenario ceiling +15%/yr over 5y → capital protected, asymmetry in your favor.

• Pat Dorsey Moat strength (Five Rules)

  A wide moat, stable; sources: intangibles, efficient scale, cost advantage, switching costs → passes the Five Rules.

• Aswath Damodaran Expectations implied by the price

  Justifying the price requires discounting -9%, within what we project (8%) — the story squares with the numbers.