A Look at Accenture’s Valuation and Upside Potential



Accenture stock returns

The first three and a half months of 2019 have been really good for tech investors. Several stocks have provided double-digit returns and have bounced back after a disappointing 2018.

The Technology Select Sector SPDR Fund (XLK) has risen by 24%, while the VanEck Vectors Semiconductor ETF (SMH) has gained close to 30% this year. But are these tech stocks overvalued at current prices or will they rise higher over the next few months?

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Technology heavyweight Accenture (ACN) has generated returns of 18% in the last 12 months. Since the start of 2019, the stock is up by 27%. Accenture stock is currently trading 0.2% below its 52-week high of $179.64 and 35% above its 52-week low of $132.63. With an RSI (relative strength index) score of 75, Accenture stock is trading well into overbought territory.

Is Accenture overvalued?

Accenture has a forward 2019 PE ratio of 24.4x. For 2020, this ratio is 22.4x. Analysts expect Accenture’s sales to rise 8.9% in 2019 and 7% in 2020. Its EPS are expected to rise 8.5% in 2019 and by 8.9% in 2020.

Its EPS could grow at a compound annual growth rate of 8.9% over the next five years. The stock looks overvalued even if we take into account its dividend yield of 1.7%.

Analysts’ recommendations

Of the 29 analysts covering Accenture, 16 have given it “buy” recommendations, 12 have given it “hold” recommendations, and one has given it a “sell” recommendation. The average 12-month target price for Accenture is $183.52, which indicates a potential upside of 2.4% from its current level.


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