IT results review: TCS beats the rest, hands down
Since it is clearly ahead of the others in terms of future expectations, TCS's shares currently trade at 21 times its estimated earnings for the year ending March 2012.
The top four IT companies have filed their results for the quarter. While all the bigwigs - TCS, Infosys, Wipro and HCL Tech - met the Street's expectations in terms of the December-quarter performance, their guidance for future growth disappointed investors.
Look at Infosys, the company that flagged off the result season on 12 January, admitted that it may not see a growth in the fourth quarter. Its stock has tumbled almost 10 percent in the past two weeks. Wipro, meanwhile, said it could grow anywhere between 1-3 percent. TCS and HCL Tech didn't provide any guidance but remained cautious on future outlook, as discretionary spending by clients slowed.
In terms of performance, Infosys posted the highest growth in net profit compared with the year-ago period - 24.4 percent. Its revenue jump was also the most - 31 percent. TCS was next with a net profit growth of nearly 18 percent; however, its revenue growth was a much lower 21 percent.
In terms of employee addition, TCS leads with more than 11,000 new employees, which provides clues on what kind of outlook and growth it expects. At the end of the past quarter, the company also had the highest utilisation of employees at 82 percent; in comparison, the other three companies had utilisation rates of 76-77 percent.
Banking and financial services remained the fastest-growing segment, constituting almost 43 percent of TCS's revenues, which also gives revenues more stability.
Since it is clearly ahead of the others in terms of future expectations, TCS's shares currently trade at 21 times its estimated earnings for the year ending March 2012. That's the highest price-earnings (P/E) multiple among all four IT stocks. Infosys' share price, in comparison, is 18 times its expected 2012 earnings, while HCL Tech's share prices is 13 times its expected 2012 earnings. In the case of Wipro, the P/E multiple stands at 15.
For a detailed comparison among the four companies, see table below:
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