Satyam is a leading global business and information technology company, delivering consulting, systems integration, and outsourcing solutions to clients in over 20 industries. It leverages deep industry and functional expertise, leading technology practices, and an advanced, global delivery model to help clients transform their highest-value business processes and improve their business performance.
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IT sector like overall economy is going through a period of uncertainty due to the global financial crisis. BFSI (Banking, Financial Services and Insurance) segment, which consists of more than 30% of IT companies revenues, would be worst affected. This makes IT sector extremely vulnerable because at present nobody knows whether the worst has come or is yet to come. The US and European economies might go into recession, putting further pressure on outsourcing industry. We may witness some downsizing by these firms to cut cost and reduce bench strength in the short run.
|
|
INFY |
SATYAM |
WIPRO |
P/E (x) |
FY08A FY09E |
21.3 16.8 |
15.3 11.6 |
20.3 17.2 |
P/B (x) |
FY08A FY09E |
7.0 5.5 |
3.6 2.9 |
5.7 4.6 |
ROE (%) |
FY08A FY09E |
36.8 37.0 |
26.0 27.6 |
22.8 19.5 |
Satyam is undervalued compared to its peers Infosys and Wipro. We could see it has the lowest P/B among the three vendors (table above). Also, its PEG is 0.7 making it grossly undervalued. Given the uncertainty in the market but solid business model, I recommend investors to take a long term view of the stock and BUY on the stock.
Stock View
Maintain overweight (BUY)
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