Stock analysis: Tech Mahindra
This article is about Tech Mahindra.
Tech Mahindra is a leading provider of consulting-led integrated portfolio services to customers which are Telecom Equipment Manufacturers, Telecom Service Providers and IT Infrastructure Service Providers, Business Process Outsourcing Service Providers as well as Enterprise Solutions Services of Information Technology and IT-enabled services delivered through a network of multiple locations around the globe. It has a diversified base of corporate customers in a wide range of industries including insurance, banking and financial services, manufacturing, telecommunications, transportation and engineering services.
Market capitalization and stock price history
Tech Mahindra has a market capitalization of 960.09 billion, at the time of making this video.
Its stock price made an all time high of rupees 1077 on 11 January 2021.
In past five years, the stock price made a low of rupees 376 on 06 July 2017.
This stock gave compounded annual growth of 28 percentage over past one year, 21 percentage over past three years, and 14 percentage over past five years.
Revenue and profits
In past 12 months, Tech Mahindra had a revenue of rupees 376.2 billion, and a gross profit of rupees 174.9 billion.
As compared to previous fiscal year, in the past 12 months, it has seen a revenue growth of 2.0%.
On 31/3/2020, Tech Mahindra reported a total revenue of rupees 368.7 billion, and has seen a revenue growth of 6.1% from the previous year.
The company reported an EBITDA of rupees 67.0 billion.
Now let us look at some key financial ratios to guage how good or bad this stock is.
Its "beta" value, which is a measure of volatility of stock, is 0.59.
This means the stock moves with less volatility than the market. High-beta stocks are supposed to be riskier but provide higher return potential; low-beta stocks pose less risk but also lower returns.
Based on the last twelve months, the price to earnings ratio is 21.89.
The price to earnings ratio indicates whether the stock is undervalued or overvalued.
Based on the last twelve months, the earnings per share value is 45.33.
Now, we will compare some key financial ratios with the top 1000 NSE stocks.
For this purpose, we divide the distribution of these key indicators in to four parts or "quartiles".
Quartile region is obtained by dividing all the stocks in 4 buckets, so that each bucket contain same number of stocks.
As compared to top 1000 stocks in NSE, Tech Mahindra has its beta value in the first quartile.
This means the stock exhibits very low volatility.
Tech Mahindra has earnings per share of 45.33, which is higher than 85% of top 1000 NSE stocks.
The earnings per share value is very good.
Earnings per share is a company's net profit divided by the number of outstanding shares. This is a wildly used metric to estimate corporate value.
Tech Mahindra has price to earnings ratio of 21.89, which is higher than 34% of top 1000 NSE stocks.
The price to earnings ratio is in the second quartile, this means the company stock may be undervalued.
A high price to earnings ratio may also mean that investors are expecting high growth rates in the future.
Price to earnings ratio measures its current share price relative to its per-share earnings.
Tech Mahindra has price to book value ratio of 3.95, which is higher than 68% of top 1000 NSE stocks.
The price to book value ratio is in the third quartile, this means the stock may be overvalued.
The price-to-book ratio compares a company's market value to its book value. Book value is net assets of the company.
This ratio should be looked at in conjunction with return on equity ratio. A low return on equity combined with high price to book ratio means stock is overvalued.
Tech Mahindra has return on equity value of 16.95%, which is higher than 71% of top 1000 NSE stocks.
The return on equity for this stock is in the fourth quartile, which is very good.
The return on equity is calculated by taking company's net earnings after taxes, subtracting preferred dividends, and dividing by the total equity.
Tech Mahindra has debt to equity ratio of 12.00, which is higher than 27% of top 1000 NSE stocks.
The debt to equity ratio for this stock is in the second quartile, which is good.
A debt to equity ratio is company's total liabilities divided by shareholder's equity, and lower value of this ratio is preferred.
This ratio is a measure of the degree to which a company is financing its operations through debt versus wholly-owned funds.
A higher value of this ratio tend to indicate higher risk to the investors.
Tech Mahindra has operating cash flow of 75.3 billion in the past 12 months, which is higher than 89% of top 1000 NSE stocks.
The operating cash flow for this stock is in the fourth quartile, which is very good.
Tech Mahindra has levered free cash flow of 55.1 billion in the past 12 months, which is higher than 80% of top 1000 NSE stocks.
The levered free cash flow for this stock is in the fourth quartile, which is very good.
Tech Mahindra has payout ratio of 33.09%, which is higher than 70% of top 1000 NSE stocks.
The payout ratio of this stock is in the fourth quartile, which is very good.
The dividend payout ratio provides an indication of how much money a company is returning to shareholders versus how much it is keeping on hand to reinvest in growth, pay off debt, or add to cash reserves.
The company reported an EBITDA of rupees 67.0 billion in year 2020, which is 2% less than the EBITDA from the previous year.
The company showcased earnings per share of 46.2 in year 2020, which is 5% less than the EPS from the previous year.
Tech Mahindra has shown year on year increase in stockholder's equity by 7.5% in year 2020.
This stock showed year on year increase in stockholder's equity by 7.7% in year 2019.
This stock showed year on year increase in stockholder's equity by 14.6% in year 2018.
Tech Mahindra has free cash flow of rupees 66.5 billion in the past twelve months.
The free cash flow for the year 2020 was rupees 35.1 billion.
Comparison with NIFTY50
Here you can see statistics related to number of shares.
36.81% of shares are help by insiders
37.00% of shares are help by institutions
TECHM is at position 29 in terms of market capitalization among the nifty 50 stocks.
TECHM is at position 30 in terms of annual revenue among the nifty 50 stocks.
TECHM is at position 10 in terms of free cash flow among the nifty 50 stocks.
Here, we presented a very simplified assessment of fundamental indicators. We categorized the performance on each indicator by comparing it with top 1000 NSE stocks.
On your side, go thoroughly through the financial data before deciding on investing in this stock.