GENPACT LTD (NYSE:G) – A Potentially Undervalued Stock with Strong Fundamentals

GENPACT LTD (NYSE:G) was identified by our Decent Value stock screener as a company with solid fundamentals and an attractive valuation. The business process management firm shows strong profitability and financial health while trading at reasonable multiples. Below, we examine why G may appeal to value investors.

Valuation

GENPACT’s valuation metrics suggest the stock may be priced below its intrinsic value:

• P/E Ratio: At 12.57, G trades below the industry average of 34.15 and the S&P 500 average of 26.69.
• Forward P/E: The forward P/E of 10.94 is also lower than the broader market (21.29) and sector (88.90).
• Price/FCF & EV/EBITDA: Both ratios indicate G is cheaper than 84-89% of its IT Services peers.

Profitability

The company earns high marks for profitability:

• Return on Equity (21.51%) and Return on Assets (10.78%) rank in the top 15% of the industry.
• Operating Margin (14.96%) and Profit Margin (10.88%) have improved in recent years.
• Consistent earnings and cash flow generation over the past five years.

Financial Health

GENPACT maintains a strong balance sheet:

• Low Debt/Equity (0.49) and Debt/FCF (2.07) suggest manageable leverage.
• Current Ratio (2.45) and Quick Ratio (2.45) indicate ample liquidity.
• Share count has decreased over time, reflecting disciplined capital management.

Growth

While not a high-growth stock, G shows steady expansion:

• Revenue grew 7.35% YoY, with a 5-year CAGR of 6.25%.
• EPS increased 9.57% YoY, with a 5-year CAGR of 9.38%.
• Analysts project 10.33% annual EPS growth going forward.

Dividend

G offers a modest but growing dividend:

• Yield of 1.62%, slightly below the S&P 500 average but above most peers.
• 12.42% average annual dividend growth over the past decade.
• Sustainable payout ratio of 20.99%.

Our Decent Value screener lists more stocks with similar characteristics.
For a deeper look, review the full fundamental analysis of GENPACT.

Disclaimer

This is not investing advice! The article highlights observations at the time of writing, but you should always conduct your own research before making investment decisions.