On technical front, OFSS has broken out of a multi year previous ATH (~ 5000) on high volumes. On fundamentals, they reported a robust revenue and Profit growth of 26% and 70% respectively – compared to years of single digit growth – This seems to suggest something is changing in the company’s structure and/or business outlook.
Despite the recent run up, the stock only seems to be at a trailing PE of ~30. Their parent, Oracle Corp, which is a $320 B behemoth, is trading slightly higher, at 31 (source: Seekingalpha). Of course, they are not comparable as Oracle is a product business while (as I understand), OFSS has a significant revenue from Services. However, even comparing with some other mid cap IT services companies, with similar or slightly lower ratios are trading at double the valuation – Persistent, for example, is trading at PE of 64.
OFSS also has a healthy dividend payout of ~3% even at this price.
Furthermore, all IT companies should benefit as and when there are rate cuts in US, as businesses will start spending more (Impact of GenAI is not fully understood, so I am keeping that out of the equation for now.)
All of this seems to suggest the stock is on a strong footing, from a long term portfolio perspective.
However, I couldn’t find any investor call post Q3 results, and the management doesn’t seem to have had any investor interaction in recent times. So, there seems to be very little information in the public domain that could be used for deeper analysis for building a long term view.
I am looking for more inputs from fellow members, and holes in any of my theory or comments above.
Disc: Have taken a technical position, and looking for more data to build a case for long term.
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