Make a Pact With Genpact

Most traders have never heard of Genpact Limited , a major player in technology consulting. That is because it serves corporate clients rather than individuals. Here is their own explanation of what they do. 2023 revenues are excepted to come in at north of $4.6 billion, a new record. EPS are projected to establish a new high as well. If this year's estimate proves accurate EPS will have grown from $0.97, in 2013, to about $2.95 - $3.00, approximately tripling over the past decade. Just since the end of 2016 per share sales, cash flow, dividends, and earnings each more than doubled. Amazingly, the recent pullback in the shares left them reflecting only about half of the value created over the most recent seven years. That sets Genpact up for a substantial catch-up move higher for those buying today. Genpact score high across all major business metrics. Its balance sheet is strong, stock price stability and price growth persistence fall in the top quintile of all 1,700 stocks covered in Value Line's main research universe. All important earnings predictability is in the top 1% of all companies in Value Line's main edition. Genpact hasn't posted a down year-over-year EPS number since a slight dip in 2014. Genpact is the epitome of a left to right growth company. That is defined as a stock with long-term steady and predictable growth across both its business and its share price. Genpact is now offered at it cheapest valuation in over a decade if you exclude the momentary Covid-panic selloff during the spring of 2020. Previous best entry points (green-starred below) saw share price rallies start with P/Es ranging from 9.2-times (at the March 2020 nadir) to as high as 15.6-times earnings early in 2021. Smart/lucky investors who caught the covid low saw the stock run from $19.40 to over $53 in about two years. Genpact's Aug. 17, 2023, valuation of 12.2-times this year's estimate and just 10.9-times next year's projected EPS sets it up for what could be a similar surge. Genpact averaged a 17.5 multiple since 2016. Reverting to a 17 price-to-earnings on next year's estimate could justify a nice jump to about $57 by Dec. 31, 2024. My goal is not far-fetched. Genpact topped between $44.60 and $54.00 during each of the five years stretching from 2019 right through 2023 year to date. Fundamentals were never as good as they are right now. Yahoo Finance conservatively calls for Genpact to reach $42.67 by this time next summer. That could prove too low. It represents only 12.9-times there own 2024 EPS estimate for G and is far below its 52-week peak of $48.85, established last November. Independent research house Morningstar notes that Genpact is now at its second lowest price to fair value in a full decade. Every other similar mis-pricing period (yellow-starred) led to substantial market rallies for Genpact shares. FAST Graphs calls Genpact's normalized multiple as 18.34-times. At its current quote of $35.85, it is offered for 10.9-times FAST Graphs' 2024 EPS estimate for G. Reverting to an 18 P/E could send Genpact up to almost $53 by the end of this year and to over $59 by Dec. 31, 2024. What more do you need to know? Genpact Limited is a premier growth stock selling for a way below market multiple. Its current yield of 1.53% compares very favorably to its long-term average yield of 0.97%. Reverse engineering the dividend to 1% calculates a $55 target price suggesting Genpact offers about 53.4% in upside potential. It is a rare thing indeed to see such a high-quality stock sell for such a large discount to its calculated fair value. Buy Genpact while it remains temporarily depressed. You will likely be very well rewarded while taking what appears to be only very minor risk.

Make a Pact With Genpact

G is a premier growth tech stock at a bargain valuation. Here's how to trade it.

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