A prudent investment decision involves betting on stocks with solid prospects and selling those that are highly risk-prone. At times, it is rational to retain certain stocks with enough potential but the same could be muted by tough market conditions.
Here we focus on Infosys Limited INFY, a stock with expected long-term earnings per share growth of 9.5%. The company has average four-quarter positive earnings surprise of 0.14%. The Zacks Consensus Estimate for fiscal 2020 earnings of 55 cents has remained stable in the past 30 days.
Moreover, the company’s price performance over the past year looks impressive. Shares of Infosys have gained 8.9% versus the industry’s decline of 8.1%.
Let’s delve deeper and analyze the stock’s prospects.
What’s Impacting the Stock?
Infosys is benefiting from growth across geographies and business segments. Strong demand for its services in cloud, IoT, cyber security, data and analytics is a key driver.
The company has delivered double-digit revenue growth for the fourth consecutive quarter. In the last reported quarter, the company recorded double-digit growth in six of its seven business segments. Robust growth in Europe and the United States was also a tailwind.
Rise in large deal wins and fast-growing digital services remain key catalysts for the company. In the last reported quarter, the company clinched 13 large deal wins with a total contract value (TCV) of $2.85 billion. Four of these were in Financial Services and Retail, two in Communications and one each in Energy, Utilities, Resources and Services plus Hi-Tech and Life Sciences segment. Geographically, six were from America, five from Europe and two from Rest of the World.
Good news is that its number of $100-million plus clients is now reportedly increased to 27 compared with 23 a year ago.
The company’s recent Stater acquisition is aiding the growth momentum in Financial Services vertical. However, seasonality and sluggishness in the capital markets as well as the European banking space are likely to keep the Financial segment stressed in the next couple of quarters.
Volatility in the retail business, which inched up 1% in the quarter ending September, makes management cautious. The segment is hurt by tight spending by clients due to elevated risk emanating from trade wars and geopolitical developments.
Nonetheless, robust momentum in communications and Energy, Utility, Resources and Services vertical is an upside.
Given the company’s solid performance in the first half of the current fiscal year, the company raised its lower end of revenue guidance for the full fiscal. Revenues are expected to grow in the range of 9-10% at cc compared with 8.5-10% predicted earlier.
Zacks Rank and Stocks to Consider
Currently, Infosys has a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader technology sector are Synopsys SNPS, Alteryx AYX and Five9 FIVN, each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for Synopsys, Alteryx and Five9 is currently projected to be 12%, 17.6% and 10%, respectively.
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Five9, Inc. (FIVN) : Free Stock Analysis Report
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