Infosys shares fell by -1.7% during the day's afternoon session, and are now trading at a price of $15.58. Is it time to buy the dip? To better answer that question, it's essential to check if the market is valuing the company's shares fairly in terms of its earnings and equity levels.
Infosys's Valuation Is in Line With Its Sector Averages:
Infosys Limited, together with its subsidiaries, provides consulting, technology, outsourcing, and next-generation digital services in North America, Europe, India, and internationally. The company belongs to the Technology sector, which has an average price to earnings (P/E) ratio of 27.16 and an average price to book (P/B) ratio of 6.23. In contrast, Infosys has a trailing 12 month P/E ratio of 21.9 and a P/B ratio of 14.06.
Infosys's PEG ratio is 1.39, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
The Company Has a Positive Net Current Asset Value:
| 2020-03-31 | 2021-03-31 | 2022-03-31 | 2023-03-31 | |
|---|---|---|---|---|
| Revenue (MM) | $12,780 | $13,561 | $16,311 | $18,212 |
| Gross Margins | 33.1% | 34.9% | 32.6% | 30.2% |
| Operating Margins | 21.3% | 24.7% | 23.2% | 21.2% |
| Net Margins | 18.24% | 19.27% | 18.17% | 16.37% |
| Net Income (MM) | $2,331 | $2,613 | $2,963 | $2,981 |
| Net Interest Expense (MM) | -24 | 191 | 194 | 191 |
| Net Interest Expense (MM) | -$24 | $191 | $194 | $191 |
| Depreciation & Amort. (MM) | -$407 | -$441 | -$466 | -$524 |
| Earnings Per Share | $0.55 | $0.61 | $0.7 | $0.71 |
| EPS Growth | n/a | 10.91% | 14.75% | 1.43% |
| Diluted Shares (MM) | 4,265 | 4,251 | 4,219 | 7,140 |
| Free Cash Flow (MM) | $2,146 | $2,973 | $3,055 | $2,534 |
| Capital Expenditures (MM) | -$465 | -$285 | -$290 | -$319 |
| Net Current Assets (MM) | $3,653 | $3,984 | $3,304 | $2,538 |
| Current Ratio | 2.62 | 2.55 | 2.0 | 1.81 |
| Net Debt / EBITDA | -0.52 | -0.65 | -0.34 | -0.1 |
Infosys benefits from a steady stream of strong cash flows, low leverage, and growing revenues and decreasing reinvestment in the business. The company's financial statements show average operating margins with a stable trend and positive EPS growth. However, the firm has slimmer gross margins than its peers. Finally, we note that Infosys has a decent current ratio.
