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September 2, 2014

4

DataMatics Global Services Ltd. – Multibagger Analysis

by Futurecaps Advisor

Datamatics is a trusted partner to several Fortune 500 Companies globally for managing their End-to-end Application Life Cycle & Business Critical Processes. Datamatics is a global Information Technology (IT) and Business Process Outsourcing (BPO) organization focused on delivering smart, next-generation business solutions that help enterprises across the world overcome their business challenges. These solutions leverage innovations in technology, knowledge of business processes, and domain expertise to provide clients a competitive edge.

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Company URL: http://www.datamatics.com/

Screener URL: http://www.screener.in/company/?q=532528&con=1

Fundamental Analysis URL: Link2014 Link2012

CMP: 58

Warren Buffett Checklist

History of Consistently Increasing Sales, Earnings & Cash Flow Yes. image
Durable Competitive Advantage

Company is being into IT for decades, Till past years it cannot make a strong brand footage.  Latest year shows double EPS & Net Profit growth though.

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Future Growth Drivers Boom in IT sector will continue for next 1-2 years; This company will definitely gain from it.  But be watchful, recession after that. image
Conservative Debt (long term debt < 3 Net Profit) Current Liabilities around 83 & Latest Net Profit around 53 which makes enough gap for 3×53 > 83; image
Debt Equity Ratio At 0.13 which is very low & good. image
Return on Equity must be Above Average ROE still around 10! We require 15 for marking green. image
Low CAPEX required to maintain current operations Seems to have high CAPEX. image
Management is holding / buying the stock Flat. But management is holding a whopping 72% holding. image
Price is Under Valued (< intrinsic value) Considering latest EPS jump of 50% and leveling it as 20%, the market price is clearly below Intrinsic Value image
Stock Price is consolidating (now) Price is at good levels with no recent hefty jumps. image
Stock Price is growing in past years along with EPS growth Moderate. image

Additional Futurecaps Checklist

Consolidated PE, PB Ratio PE 6 (good); PB: 1 (v.good) image
Cash Flow Positive, Net Profit % greater than 8% Low profit margins at 6% image
Paying Dividends, Tax Yes. image
EPS Growth Rate 20% on average. image
Jump in Trailing EPS Yes. 50%. image
Jump in Quarterly EPS Yes. 30%. image
Expected Gain in 5 Years 6-8 Times in 5 years.  If the company is lucky to super-grow & resize PE as 20, then it can go to 20-30 times in 5 years. image
Price Movement Graph, 52 Week High & Low 52 Week High & Low do not have large gaps.  image
Low Volume accelerates Price Hike Volume around 30 thousand. Good.  image
Power of Brand Moderate.  image
Corporate Governance, Reputation of Leaders Yes.  Leaders are highly experienced, qualified (MIT graduates), reputed (founding members of TCS)  image
Fraud reported Not in current search.  image

  Declaration

Considering the value parameters above, we declare Datamatics as a multibagger.  But, as the company have shown only recent year EPS-jumps, be watchful for the upcoming 1-2 quarters.

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Allocation

2-3% of portfolio.

Disclaimer

Futurecaps recommends 20 to 25 multibaggers per year, we recommend a 25% to 50% allocation of your savings in equity.  The stocks recommended here are gone through Analysts of several years experience in stock market.  Although they were successful in predicting future multibaggers, the overall stock market is a risky game.  So we recommend the reader to put his/her own thoughts & invest wisely.

Read more from Multibaggers
4 Comments Post a comment
  1. Bhavin Mehta
    Sep 2 2014

    Can you please comment on Rexnord Electronics and Controls?
    Disclosure- I personally own 400Qty at 13Rs. CMP 20. Still I feel lot of steam is left. Awaiting your reply.

    Reply
  2. vikas sanghvi
    Sep 5 2014

    I am holding tourism finance @ 39 and it is G dividend of rs 1.2 . I want your opinion on this .

    Reply
  3. Sep 6 2014

    Quite the pick. And it’s rallied like crazy last few days. Have you looked at Helios and Matheson Information Technology?

    http://www.screener.in/company/?q=532347&con=1

    Reply
    • Sep 6 2014

      Yeah! we missed the 40% gain. None of us invested in Datamatics. But our view is long term and other good scrips are available at cheap valuations.
      Helios I have checked few years back, It is good although not attractive.. Need to recheck if they gained some good contracts.

      Reply

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