Mindtree stock doubles in a year; will gains sustain?
The stock of MindtreeBSE 0.04 % has nearly doubled over the past year following improved revenues and profits backed by better operating margins. While the company's financial performance in the December 2012 quarter reflected a sustained business momentum, its current stock valuations appear to be fully discounting its growth prospects. This may limit the stock gains in the near term.
The stock has earned 90% return in the last 12 months and 30% in three months alone. The sharp increase in the market cap of the Bengaluru based mid-tier IT services player closely tracks the turnaround in its business.
The company's earnings per share (EPS) shot up by as much as 70% to Rs 63 in the nine months to December 2012 compared with the corresponding period of the previous fiscal. It also exceeded the EPSof Rs 54, which it reported for the whole of FY12. This was boosted by 26% rise in revenue and a two-fold jump in operating profit.
The company continued to show client traction during the December 2012 quarter. It added eight clients during the quarter on top of eleven customers in the previous quarter. In addition, the clients with billings above $5 million rose by four sequentially.
While the momentum looks strong, the stock seems to have factored in much of the future expected growth. According to research report by Religare, the stock trades at around 10.8 times its FY13 earnings and at 9.6 times FY14 earnings. This is on a higher side of the price-earnings band of 8-10 for mid-tier IT players. The brokerage has downgraded the stock to "Hold" from "Buy".
Source : RANJIT SHINDE,ET BUREAU