Infosys (NYSE: INFY)
, the $70 billion Indian multinational, has had a year of years, and there are still ten weeks to go in 2020. Their American Depository Receipts (ADR) shares are up more than 25% this month alone and up a full 140% since March. Not bad for a company reporting revenue growth in the low single digits.
But perhaps that’s what makes the stock so attractive to long term investors and Wall Street. The old adage of “no trader who always booked profits ever went bust” seems to hold true on a large scale as well. Infosys is the epitome of the reliable company every investor should consider in their portfolio.
They provide a range of digital consulting and IT outsourcing services and are the second-largest Indian IT company after Tata Consulting. Not only have they been able to offer impressive capital appreciation in recent months, but they also offer solid fundamentals to entice the more traditional investor as well as a dividend.
Their fiscal Q2 numbers which came out before yesterday’s session showed revenue growing almost 3% year on year as that and EPS also came in higher than analysts expected. The latter alone was up 20% year on year. While core revenue might have contracted 11%, solid performance from their digital revenue segment helped soften the blow as that saw 27% year on year growth.
Management were impressed enough with the numbers to announce an interim dividend that was up 50% on the year. This kind of move is considered to be one of the most bullish signals a company can offer investors and speaks volumes to their level of confidence in being able to continue delivering results. On a similar note, they also feel comfortable enough to be able to increase salaries in the new year, something that is unimaginable for a lot of non-IT companies out there right now.
CEO Salil Parekh struck an unsurprisingly bullish tone with the release when he said “our second quarter performance is a clear reflection of our ability to help clients on their digital transformation journeys. Our digital and cloud capabilities combined with intense client relevance are helping us achieve differentiated results in the market as is visible in 2.2% year on year overall revenue growth and 25.4% growth from digital offerings, which now are at 47.3% of revenues. Increase in revenue and margin outlook for FY 21 is due to the continued trust clients have in us. I am extremely proud of our team for achieving these results in challenging business conditions globally.”
Busy With Acquisitions
Recent headlines have given the company lots of attention and going off the share price, it’s been the right kind. Earlier this month, Infosys announced the acquisition of Blue Acorn iCi which will strengthen Infosys’ integration capabilities with the likes of Adobe and Shopify. It will also make them more attractive to CMOs and bolster their e-commerce brochure. The previous week, they announced the acquisition of GuideVision which will enhance their digital cloud services.
In early September, the company purchased Kaleidoscope Innovation, a product development firm which operates in medical, consumer, and industrial markets. As Infosys President Ravi Kumar said with the news; "this acquisition further strengthens our digital offerings at the intersection of new software technologies and medical devices - a sector that is expected to witness significant investments and consumerization in the post-COVID era”.
Seeing a trend yet? The company has been positioning themselves as the go-to consulting firm across a wide range of relevant industries and markets and is poised to continue capturing market share in the coming months. It looks like Wall Street has been in on the game for a while judging by the stock’s performance which is not even starting to look tired.
Investors thinking about getting involved should be conscious of the extended RSI, but consider any pull back from current prices to be a solid buying opportunity.
Companies Mentioned in This Article
Compare These Stocks
Add These Stocks to My Watchlist
Top Ten Brokerages You Can Trust
There are more than 500 brokerages and research houses that hire analysts to issue ratings and recommendations. Collectively, these brokerages and their analysts publish approximately 175,000 ratings each year. Every trading day, there are nearly 700 reports and recommendations that are released to the public. To say that it's difficult to separate the signal from the noise when interpreting this data would be an understatement.
MarketBeat has developed a system to track each brokerage and research house's stock recommendations and score them based on their past performance. If Goldman Sachs predicted that Apple's stock price was going to hit $150.00 on a specific date, how accurate were they? If Bank of America issued a "strong buy" rating on a stock, how did that stock perform compared to the broader market over the following twelve months. This tracking system has been applied to the 650,000+ ratings that MarketBeat has tracked during the last five years to identify which brokerages you can really trust (and which you can safely ignore).
This slide show lists the 10 brokerages who have issued the most accurate analyst recommendations over the past several years, as measured by the performance of their "buy" ratings and the accuracy of their price targets.
View the "Top Ten Brokerages You Can Trust".