Persistent Systems is a mid-tier IT Services company based in India. The company has a revenue of USD 471 million. The company previously outperformed market growth, and reported higher profit margins than peers. The company has an impressive five year average ROE of 25%. To benefit from shift in technology spend towards digital which is a USD 180 billion market growing at 18%, the company has been investing in digital through acquisitions, alliances with companies such as IBM and organic efforts. As of FY18, the digital segment of the business grew by 43%, with 21% of its revenues now deriving from that business. Growth has slowed in recent quarters, leading to the stock price falling by more than 50% and valuation to 5.5 EV/EBITDA on March 2019 earnings (adjusted for USD 185 Million cash, high cash flow generated from operations, No debt). At these valuations the business trades at a deep discount to its peers as well as large cap companies such as Wipro and Infosys.
The stock makes part of our investment fund ACATIS India Value Equities.
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Photo: Siddharth Mehta-Thomas