Infosys overtakes TCS to become the ‘most valued stock’

Infosys stock is currently trading at 18.59 times (P/E) to its 12-month forward earnings, a tad above TCS's 18.56 times, according to Bloomberg estimates. Infosys shares have outperformed TCS by a wide margin over past 12-month, as shares have appreciated about 16.43 per cent, and are trading at 52-week high, in comparison to TCS's 3.46 per cent over the same period.

In This Pic : Infosys overtakes TCS

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Analysts see this parity changing into discount over next twelve months as TCS suffers from deceleration due to large base and lack of inorganic drivers, while Infosys catches up to report industry-leading growth by FY17. The growth and consistency premium which TCS had commanded over Infosys in past three years is seen vanishing going ahead.

In This Pic : Infosys overtakes TCS

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"We believe Infosys will trade at premium to TCS going forward, led by superior revenue and earnings growth," said Daljeet Singh Kohli, head of research at IndiaNivesh. "We expect fund managers to make tactical shift to Infosys stock from TCS or reduce exposure in the company. TCS valuation discount may even widen over next few quarters if the company fails to deliver."

In This Pic : Infosys overtakes TCS

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Infosys gave revenue guidance of 11.8% -13.8% for this fiscal year, TCS has ceased giving any kind of guidance, CEO N Chandrasekaran said that he expects a strong FY17. Nasscom expects the Indian IT industry to grow 10-12% in this fiscal year.

In This Pic : Infosys overtakes TCS

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Infosys reported 13.3% growth for the year 2015-16 while margins were much more resilient in FY16 than feared by some on the street. TCS' revenue growth failed to surpass its rival company, as it grew at 11.9% in constant currency terms. The National Association for Software and Services Companies said the industry grew 12.3% in FY16.

In This Pic : Infosys overtakes TCS

Pic Courtesy : BCCL

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