Their operating margins at 20% are much lower compared to more broad-based IT players (e.g. HCL, LTTS etc) across market caps.
On the other hand margins of Tata Elxi, a similar player from Tata house, are 30%. Cash flow generation of Tata Elxi (e.g. sales/FCF) is also much superior to Tata Tech.
Yet Tata Elxi trades at 59 P/E while the latter at 72. In my view based on current performance and projected growth, Tata Tech shouldn’t be getting anything more than 35-40 P/E. Interestingly stock hasn’t corrected much after a tepid quarterly performance.
I am not invested in either, just an observation.
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