It's been a great afternoon session for Infosys investors, who saw their shares rise 1.3% to a price of $15.83 per share. At these higher prices, is the company still fairly valued? If you are thinking about investing, make sure to check the company's fundamentals before making a decision.
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 22.3 and a P/B ratio of 14.28.
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.