Infosys has become the most "premium valued stock" in the information technology space overtaking its arch rival, TCS. The brokerages have rerated Infosys stock after the company gave strong revenue guidance of 11.8%-13.8% for this fiscal year post its March ending quarterly results, which has reinforced company's aspiration of clocking above market growth.
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.
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.
"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."
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.
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.
"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."
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