Trailing Twelve Month EPS at 115.6 which is just 6% higher.
Graphs and tables. Excuse the rusty excel skills.
What’s worrying is the TTM EPS growth – it’s looking up slightly but it has been below the much required 20%. Remember, this is a stock at 3,300. That gives it a trailing P/E of 28 or more. We haven’t seen a 28% EPS growth for the last 6 quarters.
Outlook for the next quarter is a 15% EPS growth, but for the FY 2011, the EPS growth will be 9%. That’s horrendously low for a stock valued at that much. I understand a premium for good management, and an extra for the 15,000 cr. in cash they hold (Rs. 300 per share).
Stock has shown price strength but there is little on the fundamental side to support it. Yet, take that piece with caution – Infy is a market darling.
The company is too big to grow at a fast pace now, without serious innovation (I mean a Google or Apple could do it – their leverage is their products. Infy can only expand with numbers of people, which is not great leverage. Managing people is a pain, and getting more good people on board and retaining them is an expensive and time consuming exercise.
The scale helps them in terms of getting freshers and training them. But as projects move towards fixed bid rather than T&M, having experienced folks will be the differentiator. Fixed bid is now 40%+ of revenues, the highest in recent times.
The big kicker was from financial services. Are they going to get hurt badly from the mess in Europe and perhaps emerging market slowdowns?
In comparison, the sector has HCL Tech and TCS which on growth history look like a better deal.
Not interesting unless you want index exposure. Not very worthwhile to be short, though selling calls isn’t a bad idea, with a 3400 resistance.
Disclosure: One account has long exposure. Will have to trim it.
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