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Infosys (INFY) Partners Posti for Digital Transformation

Zacks Equity Research

Finnish postal service Posti has selected Infosys Limited INFY to accelerate its digital transformation initiatives.

With this collaboration, Infosys is expected to boost the modernization of Posti’s IT applications and infrastructure. By doing so, Posti will be able to shift to a flexible IT service model, thereby strengthening its ability to respond to customer needs and enrich user experience.

Petteri Naulapää, SVP, ICT and Digitalisation at Posti, was quoted saying: “The collaboration will enable us focus more on our core operations and, as customer needs become more and more digital, on improving our services."

Digital Transformation: A Key Driver

Infosys has been attempting to reinforce its digital transformation capabilities for expanding and solidifying its position in the highly competitive environment. The company is enabling clients in more than 45 countries to create and execute strategies for their digital transformation. CEO Sahil Parikh has also been focusing more on investments in digital technologies ever since he joined office.

Notably, the company offers customer relationship management plus multi-channel commerce and digital marketing to boost customer experience and increase customer acquisition.

The company's focus on Agile Digital, AI-driven Core services and Always-on learning foundation is a tailwind. We note that the company generated one-third of revenues from its digital business in fiscal 2019. The metric surged 34% year over year.

Infosys Limited Revenue (TTM)

Infosys Limited Revenue (TTM)

Infosys Limited revenue-ttm | Infosys Limited Quote

Sunny Prospects a Positive

IDC expects spending on the technologies and services that enable digital transformation of business practices, products and organizations to reach $1.97 trillion in 2022.

Further, the research firm recently added that organisations in the Asia Pacific region will spend more than $375 billion on digital transformation this year. Investing in digital transformation is expected to expand throughout the 2017-2022 forecast period with a five-year CAGR of 17.4%.

Per Harvard Business School, leading digital companies deliver better gross margins (about 55%) than digitally lagging organizations, which generate about 37%.

We therefore believe that the company’s initiatives in this regard will prove to be very beneficial for its top-line growth going forward.

Zacks Rank & Stocks to Consider

Infosys currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader technology sector are eGain Corporation EGAN, Rosetta Stone RST and j2 Global, Inc. JCOM, each flaunting a Zacks Rank #1 (Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for eGain, Rosetta Stone and j2 Global is currently projected at 30%, 12.5% and 8%, respectively.

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