Tata Consultancy Services is the largest information technology service company in India. The company offers IT services, consulting, and business solutions to some of the largest global companies, governments, and organizations. The company has a presence in banks, financial services, Insurance, communication, manufacturing, retail, and hi-tech. The company’s largest markets are Europe and India, followed by the US.
Thanks to its excellent cash-generating ability, TCS has been generous in rewarding shareholders over the years. Earlier in 2022, the company came out with a massive TCS share buyback program where it bought back about 4 crore shares at a hefty premium to the prevailing prices.
The TCS share price is also considered a defensive bet in the market, meaning one can invest in it during tough times, for instance, when inflation rises, or the rupee is weakening. This happens because most of its revenue comes from outside India, which helps negate the turmoil in the Indian economy and market.
The company has delivered consistent organic revenue growth and industry-leading margin, more than 25%, underlined analysts at ICICIdirect. Its stable management, robust return ratios at more than 40% return on capital employed, a measure that shows how efficient is the company in generating profits from its capital, and payouts at 70% also make the stock attractive.
No wonder ICICIdirect sees a 28% upside in the counter from the levels in mid-June. It has a target of Rs. 4,120, valuing the stock at 31 times price to earnings multiple on FY24 expected earnings per share. In the March quarter, the company said its US dollar revenues grew 2.6%QoQ to $6,696 million, up 14.3% YoY in constant currency terms.
Earnings before interest and taxes margins were flat at 25% for the quarter. The company’s total contract value, which refers to the total value of deals it signed, was $11.3 billion during the quarter. According to ICICIdirect, key triggers for future TCS share price NSE could be:
-TCS is a crucial beneficiary of multi-year growth in digital technologies
-Increase in outsourcing in Europe, vendor consolidation, and deal pipeline leading to revenue compound annual growth rate of 12.2% over FY22-24
-ICICIdirect expects margins to be under pressure till FY24, resulting in margin contraction of 30 bps in FY22-24
-Double-digit return ratios, strong cash generation, and a healthy payout
For a disclaimer and detailed report, click here: