Amid a daily loss of 3.63% and a substantial 3-month downturn of 40.32%, EPAM Systems Inc (EPAM, Financial) presents a curious case for valuation with its Earnings Per Share (EPS) standing at 7.31. This analysis seeks to determine whether EPAM Systems, currently priced at $180.11, is significantly undervalued as suggested by the GF Value of $338.88. Read on to uncover the layers of this valuation puzzle.
Company Overview
EPAM Systems is a prominent player in the global IT services sector, specializing in platform engineering, software development, and consulting. With North America accounting for about 60% of its revenues, EPAM's services are critical in helping companies integrate cutting-edge technologies such as artificial intelligence, virtual reality, and robotics. This introduction sets the stage for a deeper investigation into the company's financial health and market position relative to its current stock valuation.
Understanding GF Value
The GF Value is a proprietary measure reflecting the true intrinsic value of a stock, calculated through a meticulous method involving historical trading multiples, a GuruFocus adjustment factor based on past returns and growth, and future business performance estimates. According to this measure, EPAM Systems (EPAM, Financial) is significantly undervalued. This valuation suggests a potential for higher future returns, given the stock's current market price significantly trails its estimated fair value of $338.88.
Financial Strength and Stability
Investing in companies with robust financial health reduces the risk of significant capital loss. EPAM Systems boasts a cash-to-debt ratio of 11.87, outperforming 69.48% of its industry peers. This strong financial position is supported by a GuruFocus financial strength rating of 8 out of 10, indicating high reliability and low risk for investors.
Profitability and Growth Prospects
EPAM Systems has demonstrated consistent profitability, with an impressive operating margin of 11.14%, which is superior to 73.57% of companies in the Software industry. Additionally, the company's 3-year average annual revenue growth rate stands at 20.4%, highlighting its capacity to expand effectively. However, its EBITDA growth rate compares less favorally, positioning it in the middle of the industry spectrum.
Another critical financial metric is the comparison between the Return on Invested Capital (ROIC) and the Weighted Average Cost of Capital (WACC). EPAM's ROIC of 20.02 significantly surpasses its WACC of 14.42, indicating efficient capital utilization.
Conclusion
In summary, EPAM Systems (EPAM, Financial) appears significantly undervalued based on its robust financial health, strong profitability, and solid growth metrics. For investors seeking detailed financial data, consider exploring EPAM Systems' 30-Year Financials here. This analysis suggests a potential for attractive long-term returns, making it a compelling consideration for value investors.
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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.
