Over the last six months, Genpact’s shares have sunk to $35.20, producing a disappointing 8.2% loss - a stark contrast to the S&P 500’s 12.9% gain. This may have investors wondering how to approach the situation.
Given the weaker price action, is now the time to buy G? Find out in our full research report, it’s free.
Why Do Investors Watch Genpact?
Originally spun off from General Electric in 2005 to provide business process services, Genpact (NYSE:G) is a global professional services firm that helps businesses transform their operations through digital technology, AI, and data analytics solutions.
Three Positive Attributes:
1. Outstanding Long-Term EPS Growth
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Genpact’s EPS grew at 11.1% compounded annual growth rate over the last five years, higher than its 6.6% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
2. Excellent Free Cash Flow Margin Boosts Reinvestment Potential
Free cash flow isn’t a prominently featured metric in company financials and earnings releases, but we think it’s telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
Genpact has shown robust cash profitability, giving it an edge over its competitors and the ability to reinvest or return capital to investors. The company’s free cash flow margin averaged 10.6% over the last five years, quite impressive for a business services business.
3. Stellar ROIC Showcases Lucrative Growth Opportunities
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
Genpact’s five-year average ROIC was 18.4%, beating other business services companies by a wide margin. This illustrates its management team’s ability to invest in attractive growth opportunities and produce tangible results for shareholders.
Final Judgment
Genpact is an interesting business with potential. With the recent decline, the stock trades at 8.4× forward P/E (or $35.20 per share). Is now a good time to initiate a position? See for yourself in our comprehensive research report, it’s free.
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