We came across a bullish thesis on Accenture plc (ACN) on Disruptive analytics’ Substack by Magnus Ofstad. In this article, we will summarize the bulls’ thesis on ACN. ACN Technologies, Inc. share was trading at $362.24 as of Oct 4th. ACN’s trailing and forward P/E were 31.66 and 28.33 respectively according to Yahoo Finance.
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Accenture is a promising investment due to the ongoing digital transformation in both public and private sectors. Over the past 30 years, digitalization has become crucial for business operations, leading to steady growth for consultancies like Accenture. Their straightforward business model and stable accounting practices make it easier for investors to determine the company’s true value and avoid overpaying. A major factor for Accenture’s future growth is the rise of new technologies, especially artificial intelligence (AI). While cloud computing has driven growth over the past decade, AI is expected to be the next big thing. Many organizations will need expert help to integrate AI services, creating a significant opportunity for Accenture. The company’s expertise in data management, cloud computing, and cybersecurity makes it a key partner for companies.
In the latest earnings report of IT consultancies it was mentioned that many clients are very interested in AI. Some of these consultancies have even signed their first big AI-focused contracts, which are very large in both scope and value wherein Accenture reported $900 million in new generative AI deals over the past three months. Looking ahead, Accenture’s future seems even brighter. After modest revenue growth in 2024, the company is expected to see sales increase into the low double digits by 2027, while maintaining a 15% EBIT margin. Improved financial conditions have also reduced the discount rate by 0.3%, supporting a more optimistic valuation. Accenture’s fair value estimate has been raised to $350 per share, up from $315 earlier this year.
Accenture has a history of exceeding growth expectations in high-spending IT markets, suggesting they could outperform current projections, especially if AI spending is as strong as anticipated. This makes Accenture appear undervalued and poised for significant growth, presenting a compelling investment opportunity.
Accenture plc is also not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 68 hedge fund portfolios held ACN at the end of the second quarter which was 57 in the previous quarter. While we acknowledge the risk and potential of ACN as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ACN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.