NIFTY 50 heavyweight Infosys was hit hard on Monday as its weak Q4 numbers weighed in on its share price. Infosys shares declined by almost 15% intraday before settling at ₹1,259 apiece, down by 9.37%. The IT major’s shares hit a new 52-week low of ₹1,185.30 apiece, raising concerns there might be more pain ahead.
There’s no denying the numbers were weak. Infosys reported a 7.8 per cent year-on-year growth in consolidated net profit to ₹6,128 crore, well below estimates. It also lowered its FY24 constant currency revenue growth guidance to 4-7%. However, investors must avoid panic selling as Infosys remains one of the pillars of the Indian economy.
Infosys—Still a giant
The second-biggest IT company in India, Infosys is a key contributor to the Indian economy. It employs lakhs of citizens and has offices in several countries. The company’s business is also vital for India’s exports, making it among the most valuable businesses to invest in on the National Stock Exchange (NSE).
While the Q4 numbers were disappointing, they do not affect the company’s lean business model. Infosys and Tata Consultancy Services (TCS), the company’s largest IT companies, have asset-light models with incredibly high free cash flows. The former has over $2.50 billion of cash and cash equivalents,
Also, Infosys majorly exports its services, making it a pure export play and giving investors exposure to the USD INR currency depreciation. demonstrating its pedigree.
A solid fundamental pick
An important aspect investors must consider when analyzing Infosys is its extremely healthy sales growth. The company’s 10-year, 5-year, and 3-year sales growth ranges between 14-16% CAGR. It shows that Infosys has grown well historically and should replicate the performance in the future despite the near-term challenges.
What makes the IT major an attractive pick after Monday’s rout is that it is available at the lowest OPM (Operating profit margin) band of 23-24% in the past 10 years. You can buy it at 21 – 22x PE (Price to Earnings ratio), where its 10-year average PE is 20x.
Times are tough, but Infosys is a market leader and should be on investors’ radars as a long-term investment pick.