EPAM Systems Inc (EPAM, Financial) has experienced a slight daily loss of 1.16%, yet it boasts a 3-month gain of 5.1%. With an Earnings Per Share (EPS) of 8.02, investors might wonder if the stock is significantly undervalued. This article delves into EPAM Systems' valuation, providing a comprehensive analysis for investors considering this potential opportunity.
Company Introduction
EPAM Systems is a prominent global IT services firm with a strong presence in North America, contributing to around 60% of its revenues. The company specializes in platform engineering, software development, and consulting services, with a keen focus on emerging technologies such as artificial intelligence, virtual reality, and robotics. A comparison between EPAM Systems' current stock price of $255 and the GuruFocus Fair Value (GF Value) of $400.59 suggests that the stock may be significantly undervalued, warranting a closer look at its intrinsic value.
Summarize GF Value
The GF Value is a proprietary measure that estimates the intrinsic value of a stock. It incorporates historical trading multiples, an internal adjustment factor based on past performance and growth, as well as analyst estimates of future business performance. When a stock's price lies significantly below the GF Value Line, it indicates potential for higher future returns. With a market cap of $14.70 billion and a current price per share well below the GF Value, EPAM Systems Inc (EPAM, Financial) appears to be significantly undervalued, hinting at a promising long-term return on investment.
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Financial Strength
Investors must consider a company's financial strength to sidestep the risk of permanent capital loss. EPAM Systems boasts a cash-to-debt ratio of 11.1, ranking it above 66.54% of its peers in the Software industry. With an overall financial strength rating of 8 out of 10, EPAM Systems' financial health is robust, indicating a lower risk of financial distress.
Profitability and Growth
EPAM Systems' profitability is a testament to its less risky investment profile, with a track record of profitability over the past decade. The company's operating margin of 12.07% surpasses 75.8% of its industry competitors, reinforcing its strong profitability. Additionally, EPAM's growth prospects are impressive, with a 3-year average annual revenue growth rate of 27%, outperforming 82.14% of companies in the Software industry.
ROIC vs WACC
An evaluation of EPAM Systems' Return on Invested Capital (ROIC) relative to its Weighted Average Cost of Capital (WACC) reveals a company effectively creating value for its shareholders. With an ROIC of 21.8% against a WACC of 13.61%, EPAM Systems is successfully generating cash flow relative to the capital invested in its business.
Conclusion
In summary, EPAM Systems (EPAM, Financial) stands out as a significantly undervalued stock. The company's financial condition and profitability are robust, and its growth rates are favorable compared to industry peers. For a more detailed exploration of EPAM Systems' financials, interested investors can review the company's 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
