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IT services giant Tata Consultancy Services, which on Monday became the first Indian IT company to cross a market capitalisation of $100 billion, has had a stellar run since its listing on August 25, 2004.
Rebasing the listing price to adjust for two bonus issues, in July 2006 and June 2009, each in the ratio of 1:1, the TCS stock has given returns of around 1,260 per cent in about 14 years.
Consistent performance
“With its consistently superior financial performances, it is no surprise that the stock has been rewarded by the street, particularly for its consistency,” said Harit Shah, Senior Analyst - IT, Reliance Securities.
“Over the past five-odd years, TCS’ average forward PE multiple stands at 19.3x vs 16x for Infosys, implying an average PE premium of over 20 per cent for Tata Consultancy Services.
“For such a large firm in a maturing industry to be able to maintain and even enhance profitability over so many years, and to be able to deliver well above industry revenue growth, is no mean feat. We expect the IT major’s strong processes, execution engine and operational efficiency to drive its performances going forward as well, given that these factors are structural and give it a competitive advantage versus its peers.”
The TCS stock rose 6.8 per cent last Friday, after the company reported a positive business outlook for FY19, along with stable margins.
“With robust deal wins and greenshoots in the banking, financial services and insurance (BFSI) sector, there is the definite possibility of double-digit revenue growth,” Edelweiss Research said in a note.
“With growth acceleration, scale up in digital and support from currency, margins are ready for uptick as well, implying the return of double-digit revenue/earnings growth after three years,” it said.
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