R Systems – Multibagger Analysis

R Systems – Multibagger Analysis

R Systems, founded in 1993, is a specialized IT Services & Solutions and IT-enabled Services provider catering to a wide range of global customers. We are endowed with some of the industry’s highest quality certifications and standards, including SEI CMMI Level 5, PCMM Level 5, ISO 27001:2005 and ISO 9001:2008. Our IT services and solutions span five major verticals which include Telecom & Digital Media, Banking & Finance, HealthCare, Manufacturing & Logistics, and Government Services.

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Website: http://www.rsystems.com/

CMP: 53

Screener: http://www.screener.in/company/?q=532735&con=1

Warren Buffett Checklist

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

Okay.  Company is not a big player; No niche segment share.

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Future Growth Drivers Good.  For next 2-3 years IT should provide good growth. image
Conservative Debt (long term debt < 3 Net Profit) Yes.  100 crore is current liabilities, net profit 69. image
Debt Equity Ratio Good at 0. image
Return on Equity must be Above Average 25%. Impressive image
Low CAPEX required to maintain current operations Good. image
Management is holding / buying the stock Flat. Indian Promoters increasing stake, Foreign Promoters selling few in past 2-3 years. image
Price is Under Valued (< intrinsic value) Yes. image
Stock Price is consolidating (now) Yes. image
Stock Price is growing in past years along with EPS growth Okay. image

Additional Futurecaps Checklist

PE, PB Ratio Consolidated PE: 9 (good); Standalone PE: 17; PB 2.5 (little high) image
Cash Flow Positive, Net Profit % greater than 8% Yes.  NP% around 20% of Sales. image
Paying Dividends, Tax Yes. image
EPS Growth Rate 30% to 100% in past 1-2 years. image
Jump in Trailing EPS Yes. 30% image
Jump in Quarterly EPS Yes. image
Expected Gain in 10 Years 10-12X in 5 years considering 30% as average EPS  growth & PE resizing in 5 years to 20 (IT standard) – If current growth level is maintained. image
Volume Analysis 41 thousand. Good to catch fire. image
Power of Brand Company is building around product brands. image
Corporate Governance, Reputation of Leaders Good. image
Fraud reported Not in current serach. image

Declaration

Considering the historical growth & on the grounds of value-analysis Futurecaps declares R Systems as a Multibagger.  Be watchful on the quarterly results.

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Allocation

2% to 3% of your 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.

5 Replies to “R Systems – Multibagger Analysis”

  1. I feel promoter (indian/ foreign) are quietly selling small small quantity. Same thing happened last week also.
    This is dubious stock. Hence Mr. Market man is being cautious on this.

  2. Sir, I copied the following values I copied it from moneyworksforme site.
    P/BV 3.43 2.67
    PE 14.04

    So PE of 14 for this stock looks fully priced and less scope to PE expand.you had mentioned that PE of 5, Could you please elaborate on this?. is it based based PE estimated for Fy15?.

    1. Hello Selva,

      Further cross-checking with google-finance & R Systems web site, it seems like the PE is still around 10. Please verify.

      http://www.rsystems.com/investors/financialdata2013/R_Systems_International_Limited_Annual_Report_2013.pdf

      https://www.google.com/finance?q=NSE%3ARSYSTEMS&ei=dCz_U8HeH8SerAH_sIGIBQ

      Plus in moneyworks4me.com there are Standalone & Consolidated PE. I think that makes the difference. We should take Consolidated one.

      Regards,
      Adviser

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