Is it a good time to buy Infosys Technologies?

by Manshu on September 14, 2008

in Opinion

I have had Infosys in my portfolio for a long time now and although it is giving negative return right now, I was wondering if it is a good time to buy some more stock now.

For one the fall in the dollar value impacted Infosys quite a bit in the early part of the year but the dollar has gained strength now. But more importantly Infosys still remains the best of the lot as far as the Indian IT companies are concerned and is available at attractive valuations right now.

1. Climbing the value chain: Infosys is rapidly moving up the ladder in terms of providing value added services. This is especially important because the application development market is becoming increasingly commoditized and in order to grow revenues by keeping the profit margins intact, the bigger companies need to enter newer areas. Infosys has done a lot of big ticket acquisitions in recent times and it gets around half of its revenues from newer areas and not the core areas of application development and maintenance.

2. Geographic Diversification: I was surprised to see that Infosys is now getting only 62% of its revenues from North America. This means that it relies really less on North America as its chief source of revenue and has done a good job of diversifying globally.

3. Reasonable Valuation: For a blue chip like Infosys the current valuation really looks very attractive. The company has given EPS guidance of Rs.95 for the coming year and the current stock price which has been hovering around Rs.1800 mean that the P/E is less than 20. That means that Infosys is trading at one of the lowest P/Es in the last five years or so and offers very attractive valuation.

So there you have it, three reasons why Infosys looks attractive right now.

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