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Accenture Sees High Return on Equity in 2Q15

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Accenture’s high return on equity

In 2Q15, Accenture’s (ACN) ROE (return on equity) was 53.35%, compared to 60.12% in the same period last year. The company’s ROA (return on assets) decreased as well to 18.51% from 19.6% during the same period.

Accenture’s gross margin for 2Q15 was 30.51%, compared to 30.78% in 2Q14, whereas its operating margin decreased to 14.31% from 13.70% during the same period.

The company’s interest coverage ratio looks comfortable, due to low debt levels and to the fact that its operating margin has been expanding steadily. Analysts believe Accenture’s dividend payout ratio is high at 0.82.

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Cognizant’s high operating margin

In 2Q15, Cognizant Technology Solutions’ (CTSH) ROE was 20.1%, compared to 21.85% in the same period last year. The company’s ROA decreased as well to 14.50% from 17.54% during the same period.

Cognizant’s gross margin for 2Q15 was 40.2%, compared to 40.43% in 2Q14, whereas its operating margin decreased to 17.68% from 19.39% during the same period.

Gross margin has been in long-term decline for Cognizant, with an average rate of decline per year being -1.6%. The company’s asset growth over the past five years has been 29.7%, compared to a revenue growth of 25.1% during the same period, which indicates low efficiency.

Wipro’s and Infosys’s returns and margins

In the last quarter, Wipro’s (WIT) ROE was 20.69%, compared to 23.96% in the same period last year. The company’s ROA decreased as well to 14.06% from 16.52% during the same period.

Wipro’s gross margin for 2Q15 was 30.72%, compared to 32.7% in 2Q14, whereas its operating margin decreased to 19.63% from 21.35% during the same period. The company’s interest coverage ratio looks comfortable, due to low debt levels.

In 2Q15, Infosys’s (INFY) ROE was 22.11%, compared to 24.35% in the same period last year. The company’s ROA decreased as well to 17.96% from 20.14% during the same period.

Infosys’s gross margin for 2Q15 was 36.44%, compared to 36.99% in 2Q14, whereas its operating margin decreased to 23.98% from 25.13% during the same period.

Both gross margins and operating margins have been in long-term declines for Infosys, with the company’s average rate of decline per year being -3.2% and -4.3%, respectively. Infosys’s asset growth during the past five years is 24.7%, compared to a revenue growth of 20.6% during the same period, which indicates low efficiency. The company’s dividend payout is high, as well, at 2.49.

To gain exposure to Accenture, you can invest in the Technology Select Sector SPDR Fund (XLK) and the Vanguard Information Technology ETF (VGT). The company’s stock accounts for 1.37% and 1.35% of these portfolios, respectively.

In the next part of this series, we’ll look with greater detail at Cognizant’s recent stock trends.

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