Tata Consultancy Services (TCS) is an Indian multinational information technology (IT) service and consulting company and a part of the Tata Group. Founded in 1968, TCS has achieved rapid expansion and has become one of the largest IT solution businesses in the world, employing cutting-edge technology with a client thriving strategy.
TCS operates in all industry sectors including Telecom, Retail, Banking, Financial Services, Insurance, among others. With the utilization of its Global Network Delivery Model (GNDM), TCS raised the standards of quality in software development and IT related service providing.
As of 18th October 2024, TCS’ share price on the National Stock Exchange (NSE) stood at Rs 4,116, which is a slight drop of 0.17% or Rs 7.05 from the previous closing price.
The stock started the session on the day at Rs 4,090.00 and has been in a trading range of Rs 4,080.00 to Rs 4,146.15 during the period. In the past 52 weeks, TCS share prices are seen between the lowest value of Rs 3,311.00 and the highest traded figure at Rs 4,592.25 which shows positive performance in the marketplace.
Market cap: Rs 14.945 trillion
Price-to-Earnings (P/E) Ratio: 31.60
Earnings Per Share (EPS): Rs 130.70
1-Year target estimate: Rs 4,305.17
TCS further declared a dividend of Rs 40.00 per share. This gave the share a dividend yield of 0.97. The ex-dividend date was mentioned as October 18th 2024. Thus those investors who bought the share before this date were entitled to dividend.
TCS announced its financial results for Q2 FY25 on October 10th 2024. The quarter was marked by both opportunities and challenges in terms of performance which the company showed resilience over despite the lackluster demand. The results capture TCS’s ability to adjust growth rhythm to maintain expansion level even in tight economic environment and core market-s segments.
Revenue: Rs 64,259 crore, a year-over-year (YoY) growth of 7.6%.
Operating Margin: 24.1%, representing a sequential decline of 60 basis points.
Net Margin: 18.5%.
Earnings Per Share (EPS) Growth: 6.2% YoY.
Net Cash from Operations: $1.4 billion, with a cash conversion rate of 100% of net income.
Free Cash Flow (FCF): $1.3 billion.
Interim Dividend: Rs 0.1 per share
Banking, Financial Services, and Insurance (BFSI), Consumer Business Group and Life Sciences & Healthcare segments grew marginally by 0.1%.
Manufacturing saw growth of 5.3% showing strong demand in this sector.
There was a downturn of 1.9% in Technology and services while Communication and Media segment saw a decline of 10.3%.
The growth for Energy resources & utilities was at 7%.
Emerging markets also contributed to the overall strong demand which resulted in regional markets witnessing a stunning 50.4% growth.
TCS’S India regional performance was very impressive with a stupendous 95.2% growth rate.
Middle East and Africa grew by 7.9% and Asia Pacific followed with a 7.5% growth.
Latin America grew by 6.8%, UK was at 4.6% and Europe grew by 1.8%
North America witnessed a downfall of 2.1% owing to client-specific factors and slow spending.
TCS continued to strengthen their business pipeline as they reported a total contract value (TCV) of $8.6 billion in Q2 FY25. Some of the major contributions were:
BFSI: $4.6 billion
Consumer Business Group: $1.2 billion
North America: $4.4 billion
These numbers emphasize on the significant deal momentum of the company particularly in sectors: BFSI and consumer business.
Revenue Growth: TCS’s year-on-year revenue growth improved by 7.6%, showing steady demand across its key verticals.
BFSI Recovery: The BFSI sector, which had its share of difficulties in the previous quarters, recovered and added value to the overall performance in the period under review.
Innovation in Automation: TCS’s Ignio cognitive automation suite secured 34 new deals with 4 go lives signifying sustained demand for AI and automation solutions in the market.
Strong Order Book: With a total contract value (TCV) of $8.6 billion, the company maintained a strong order book which is a good signal for growth.
North America Revenue Decline: TCS major market North America registered -2.1% decline in revenue owing to a dampened discretionary spend and delays in closing of deals.
Segment-Specific Weakness: There was a contraction of 1.9% in the Technology & Services segment and 10.3% in Communication & Media segment and these impacted overall growth .
Operating Margin Pressure: Revenues declined by 60 bps sequentially; the main cause was a rise in third-party expenses and investments in people and infrastructure that are ongoing.
Cautious Demand Environment: Discretionary spending still focused on the essentials and this was especially true for Life Sciences & Healthcare sectors where there were client-specific challenges.
TCS has shown strong growth performance over different periods which returns on investment increasing each year.
Year-To-Date (YTD) Return: This year TCS was able to return +10.77% while the S&P BSE Sensex returned +12.44%. This shows TCS performed well this current year.
1-Year Return: TCS provided a very good return of +20.24%, which is slightly lower than the benchmark’s +24.20%.
3-Year Return: TCS has managed to earn +19.82 in contrast to the S&P BSE Sensex's +32.59%, reflecting consistent long-term growth.
5-Year Return: TCS has shown impressive growth with a return of +116.54%, even above the benchmark's return of +106.69%. This shows how good investment TCS can be for long term.
When comparing TCS with its key competitors in the Indian IT services industry, the following insights can be noted.
TCS is trading at Rs 4,115.70 as of writing and with a market cap of Rs 14.891T. This shows a slight drop of 0.18%.
Infosys is trading at Rs 1,851.85 with a market cap of Rs 7.67T. This is a drop of 1.48%, indicating some market challenges despite being a close competitor to TCS.
Wipro has a current price of Rs 556.45 and a market cap of Rs 2.908T. It registers a rise of +1.42% making it a strong performer in this comparison.
HCL is priced at Rs 1,863.00 and with a market cap of Rs 5.T. This shows a slight growth of +0.29%.
To summarize, TCS is the market leader in terms of both share capitalisation and consistent increase on a single scale, while Wipro does come out at the top in terms of all percentage increases. Also, Infosys is struggling at the moment in the short run.
Earnings Per Share : Expected EPS value was missed in Q423 where TCS managed to report EPS of -$1.38. But the company recovered in the following quarters beating estimates in Q1 2024 with +0.93 and +0.24 Q2 2024. Growth is anticipated and it is expected that TCS shall post an EPS growth in Q3 2024 as well.
Revenue vs Earnings: Over the last few quarters, TCS's revenue has remained steady, with Rs 642.59B recorded in Q3 2024, while earnings have hovered around Rs 119.09B. Despite a dip in Q4 2023 earnings, the company has shown resilience, maintaining strong revenue and recovering in subsequent quarters.
TCS has been trading bearish. This is after it recently hit Rs 4,592 high on August 30th 2024. The stock is currently filling a fair value gap and continuing its short term downtrend.
If this bearish momentum is likely to continue, TCS may drop further to around Rs 3,800 where it is expected to meet an ascending trendline support. This support level could act as a crucial point for a potential reversal.
The Indian consultancy firm, Tata Consultancy Services (TCS), has been able to maintain its impressive performance through thick and thin, owing to its multiple lines of businesses and its worldwide operations across the target market. Examples of this strategy include further partnerships such as the one with McDonald's Philippines, and the extending of the company's innovation presence to places such as the TCS Pace Studio in Stockholm in order to achieve digital transformation and operational improvement.
Despite some challenges, such as a decline in North America revenues and segment-specific downturns, TCS’s overall growth direction remains promising.
With stable financial metrics, a lower volatility profile and a projected target price of Rs 4,305.17 in 2024, the company is poised for sustained growth. As TCS adapts to changing global trends and advances its technology-driven solutions, its stock is expected to see upward momentum, positioning it as a reliable investment for long-term growth through to 2030.