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How Does Infosys Compare to Its Peers?

Gabriel Kane

US Equity Market Update for October 12, 2015

(Continued from Prior Part)

Infosys and its peers

An analysis of Infosys’ income statement in 2Q16 follows:

  • The net profit margins of Infosys Limited-ADR (INFY), IBM (IBM), Hewlett-Packard (HPQ), Cognizant Technology Solutions (CTSH), and Wipro Limited-ADR (WIT) are 21.7%, 16.9%, 3.4%, 13.6%, and 18%, respectively.
  • These companies’ EPS (earnings per share) are $0.23, $3.57, $0.47, $0.68, and $8.89, respectively.

An analysis of Infosys’ balance sheet in 2Q16 follows:

  • The current ratios of Infosys, IBM, Hewlett-Packard, Cognizant, and Wipro are 3.7, 1.3, 1.1, 3.5, and 2.7, respectively.

An analysis of Infosys’ valuation follows:

  • The PE (price-to-earnings) ratios of Infosys, IBM, Hewlett-Packard, Cognizant, and Wipro are 20.3x, 10.1x, 12x, 26.7x, and 22.7x, respectively.
  • The PBV (price-to-book value) ratios of Infosys, IBM, Hewlett-Packard, Cognizant, and Wipro are 4.8x, 10.9x, 2x, 4.7x, and 4.7x, respectively.

The price-to-sales ratios of Infosys, IBM, Hewlett-Packard, Cognizant, and Wipro are 4.4x, 1.7x, 0.5x, 3.6x, and 3x, respectively.

According to the above findings, the peers outperformed Infosys based on the EPS and PE ratio. However, Infosys is way ahead of its peers based on the net profit margin, current ratio, PBV ratio, and price-to-sales ratio.

ETFs that invest in Infosys 

The First Trust ISE Chindia Fund (FNI) invests 6.2% of its holdings in Infosys. FNI tracks an index of stocks from China and India. The stocks are screened by market cap and weighted in tiers.

The BLDRS Emerging Markets 50 ADR ETF (ADRE) invests 3.9% of its holdings in Infosys. ADRE aims to track a market-cap-weighted index of roughly 50 depositary receipts from emerging markets. Currently, the fund is heavily weighted in Brazilian ADRs (American depositary receipt).

The SPDR S&P BRIC 40 ETF (BIK) invests 3.6% of its holdings in Infosys. BIK tracks a cap-weighted index of roughly 40 stocks from the BRIC (Brazil, Russia, India, and China) economies.

Comparing Infosys and its ETFs

An analysis of Infosys’ price movement follows:

  • The YTD (year-to-date) price movements of Infosys, FNI, ADRE, and BIK are 15.3%, -3.4%, -13.2% and -6.8%, respectively.

An analysis of Infosys’s valuation follows:

  • The PE ratios of Infosys, FNI, ADRE, and BIK are 20.3x, 19.8x, 11.4x, and 4.3x, respectively.
  • The PBV ratios of Infosys, FNI, ADRE, and BIK are 4.8x, 2.9x, 1.4x, and 1.1x, respectively.

According to the above findings, Infosys is way ahead of its ETFs based on the price movement, PE ratio, and PBV ratio.

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