An Accenture Plc (ACN) Insider’s Family LP Bought 20,000 Shares

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Other IT services companies include International Business Machines Corp. (NYSE:IBM), Wipro Limited (ADR) (NYSE:WIT), Computer Sciences Corporation (NYSE:CSC), and Gartner Inc (NYSE:IT). There’s a fairly wide range in these companies’ valuations; for example, IBM and Computer Sciences both trade at 11 times forward earnings estimates, pricing them at a considerable discount to Accenture Plc (NYSE:ACN) on that basis. These two businesses have been a bit more troubled than Accenture, with revenue declining moderately in their most recent quarterly report compared to the same period in the previous fiscal year in each case. However, they might be worth looking into on the basis of their low multiples.

Both Wipro’s trailing and forward earnings multiples come in at 15, as Wall Street analysts expect stagnant financials from the company; we’d note that Wipro would have to eventually improve its net income in order to be a buy at this price, and so we’d avoid it for now based on the sell-side’s pessimism. Gartner has been experiencing growth, going by recent reports, but markets have bid up the stock price so much that the forward earnings multiple is 25. As a result it’s too expensive to interest us at this time.

Valuations seem high in quite a few cases in this industry, and assuming that Accenture Plc (NYSE:ACN) doesn’t have a path to at least moderate earnings growth over the next several years- and its recent report suggests that it won’t, as recent results have been boosted by tax rates and reorganization benefits- we don’t think that this is a good insider purchase to imitate. IBM and Computer Sciences are cheap, at least, but we’d noted that they have not been performing well recently.

Disclosure: I own no shares of any stocks mentioned in this article.

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