Analysis of Mindtree
Sentiment is a huge factor for any momentum shift. Once it takes a turn for good or bad there is no stopping to it. Here I am referring to IT sector stocks as a whole. Year 2013 – 2015 was the best period to buy IT stocks. This is very evident from the graph of any IT sector stock. The bullish run continued for almost 3 years. I myself was invested heavily in Mindtree in 2013. During this period there were 2 bonus allotments in the ratio of 1:1.
This is the graph of Mindtree
As you can see post mid 2016 the stock has been falling constantly, courtesy weakness in top clients. The stock was trading at a high of INR 803.5 on 4th March 2016 and fallen to 400 on 8th Nov, a good 50% erosion of the capital in a span of just 8 months. Reason being overall depression in IT market due to external factors in the U.S plus Brexit in the U.K.
Current status of Financials
- The stock is trading at a P.E of 19.61 which is at par with other IT stocks like Hexaware.
- The debt of the company is just 95.5 Cr. against the Net Worth of 2,757.80 Cr. This is excellent!
- The operating income has been gradually increasing, the interest cost is gradually reducing and the employee cost is increasing which can be an indication that they have many projects in the pipeline.
Future Prospects of Mindtree
- Signals of improvements in IT sector is already visible. Today (22nd Dec, 2017) TCS won the biggest IT contract ever for Indian IT firm worth $2.25 Billion from Nielsen. It is just a matter of time when we see some news in Mindtree as well.
- With the current performance of P.E at 19.61 and EPS at 9, the fair value of this stock is anywhere between INR 675 – 750 by March, 2018
The CMP of the stock is INR 600. A good entry point in the stock can be between 570-575. If you are a long term investor, hold you seats as you can expect the price to double from here provided the external factors are favorable.
There is no doubt that year 2018 will be the year of IT and Mindtree would certainly benefit from it.
Hope you enjoyed the article! Stay tuned for more updates.
Happy investing! 🙂
I am NOT a SEBI registered advisory nor a stock broker or a personal financial advisor. The investment should be done based on each investor’s financial capabilities, holding time period and expected returns. I hereby declare that I am not forcing / suggesting anyone on specific personal investment decisions.
The views expressed here are solely my own views and I should not be held liable for any financial losses or the profits. Investors are hereby requested to do their own analysis before they take any decision.