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June 1, 2013

Infotech Enterprises Ltd. – Multibagger Analysis

by Futurecaps Advisor

In this post, we would like to screen Infotech Enterprises Ltd. as a potential multibagger.

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Infotech Enterprises provides leading-edge engineering solutions, including product development and life-cycle support, process, network and content engineering to major organizations worldwide. With over two decades of continuous growth, Infotech leverages a global delivery and collaborative engineering model to achieve measurable and substantial benefits for our clients. Whether your organization needs to design innovative products faster, optimize R&D costs, increase market share, enhance operational efficiency or maximize the return on investment in your networks, Infotech Enterprises is the ideal partner.

Infotech has 10,000+ associates across 36 global locations. We adopt a proactive approach to serve our clients with our best-in-class delivery centers in North America, Europe, Middle East and Asia Pacific. Our clients span multiple industries such as Aerospace, Consumer, Energy, Medical, Oil and Gas, Mining, Heavy Equipment, HiTech, Transportation, Telecom and Utilities and include 22 ‘Fortune 500’ and 27 ‘Global 500’ blue chip organizations.

Research Link

Warren Buffett Checklist

History of Consistently Increasing Sales, Earnings & Cash Flow Yes, Sales & Net Profit increasing 20% plus every year.  Trailing year too expressed growth. image
Durable Competitive Advantage We believe the product portfolio & niche skills will enable this company to continue as a Profit Player. image
Future Growth Drivers Information Technology sector is expected to grow further in long term.  image
Conservative Debt (long term debt < 3 Net Profit) Yes.  It is less than 2 times of Net Profit image
Return on Equity must be Above Average Return on Equity is around 15%.  Theoretically it should be above 20%. image
Low CAPEX required to maintain current operations CAPEX is around 20%. image
Management is holding / buying the stock Management is Holding the stocks, but only around 22%.  This leaves room for concern, as our happy promoter holding percentage is above 50. image
Price is Under Valued (< intrinsic value) Considering the Growth, Intrinsic Value is many fold of current price. image
Stock Price is consolidating Stock is around 52 week low, but not seems to be in down trend. image

Additional Futurecaps Checklist

PE, PB Ratio PE is half of Industry PE, so good.  Price is quoting just 30% above Book Value, so good. image
Cash Flow Positive Company is maintaining a Positive Net Cash Flow. image
Paying Dividends Yes. image
EPS Growth Rate 20% to 30% EPS growth for past 3 years, Impressing! image
Expected Gain in 10 Years If the stock can maintain 30% growth rate every year, then in 3 years price should double, resulting in 8 times returns in 10 years.  Company hold a Blue Chip shine during the time & can command high PE Ratio up to 20 (current is 8), so there is further 2x opportunity.  So MAX GAIN expected is around 16 times. image
Power of Brand Branding attracts more sales, more profit margins!  Our company is building a brand & quite possible to be a brand like Infosys, TCS in future. image

Conclusion

Considering the Performance, Value Factors we see Infotech Enterprises as a potential Multibagger.

Disclaimer

Investment Decision is your sole responsibility.  Futurecaps recommends proper diversification in your Portfolio.

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