Capitalmind
Capitalmind
Actionable insights on equities, fixed-income, macros and personal finance Start 14-Days Free Trial
Actionable investing insights Get Free Trial
Stocks

Infy Announces Subdued Results, Up 12%

Infosys announced results today and the stock is up 12%. What’s that about? We don’t know, and all we’re sure of is that markets surprise you. As usual, I’m going to show the results in charts.

Revenues Up Just 3%, Earnings Per Share Down From Last Quarter

In a quarter when the rupee had fallen 10% (from 54 to 59), you would expect revenues to have risen, and they are up about 7% (2.7% in dollar terms) from the March quarter and 17% year on year.

Profits, though, have fallen since the March quarter. I have no idea why – most of their expenses are in rupees.

image P/E goes back to 17, But No Other Number Impresses

At a price of 2830, the stock quotes at an Earnings Multiple (P/E) of 17. However, that’s the good part. The bad part is that the Trailing Twelve Month (TTM) EPS growht has fallen to 7%, the lowest in over two years, and hugely down from the 30% growth we saw recently.

 

image

Employee Growth Falters, Utilization Goes Up

Even though they hired over 10,000 people in the quarter, Infy lost more than 9,000 to attrition and thus, the net hiring was a tiny 0.37% over last quarter (4% over last year). To compensate, utilization jumped up nearly 5% to 75%.

image

Given that most projects are Time and Materials (60%), the lack of growth in employee headcount is worrying. This is not a product business, but a service business, and you need headcount growth.

Business Still Remains US Centric

image

There’s no surprise there, as the US is improving and the dollar is strengthening.

Trading Disclosures

Sadly, no positions this time. The last few result days have seen incredible moves and I’ve played them. However, this time, the options positions seemed too expensive, but I should have taken them on anyhow.

image

But the day is still young – 3:30 might have a different picture on.

Would I buy this stock? There are others that present better opportunities – from the HCL Techs, to even the Indian plays of Vakrangee Software. However, IT is something you have to buy – the rupee slide will guarantee great rupee results for most of them.

Like our content? Join Capitalmind Premium.

  • Equity, fixed income, macro and personal finance research
  • Model equity and fixed-income portfolios
  • Exclusive apps, tutorials, and member community
Subscribe Now Or start with a free-trial