Stock Valuation: Infosys Ltd (INFY)

Name of Company Country of Origin/ Exchange Traded Sector Stock Price
INFOSYS LTD India/
BOM
Technology – Application Software – Information Technology Services INR1269.20
@ 28 Jun 2018
COMPANY PROFILE Infosys Ltd is engaged in consulting, technology, outsourcing and next-generation services. It offers software re-engineering, maintenance, systems integration, package evaluation and implementation and infrastructure management services.

Infosys is a global provider of consulting and IT services. The company was founded in 1981, employs more than 199,000 staff, and serves clients in over 50 countries. Infosys provides a raft of services such as management consulting, application and infrastructure management, application outsourcing, and business process outsourcing, to name a few. The firm serves more than 20 industries ranging from aerospace and defense to financial services, health care, and the public sector.

Stock Code INFY
Stock Valuation Below

Infosys Price to Sales

The Price to Sales Ratio is a commonly used valuation indicator for a stock. While not as popular as the Price to Earnings Ratio, it overcomes some of the limitations of the PE Ratio in that it can be used even when the company is not making a profit or only making minimal profits. However, it should not be used by itself because a company may be achieving sales but not profits.
At the price of INR1269.20 as at 28 Jun 2018, Infosys Ltd is trading at a Price to Sales Ratio of 3.8 times last 12 months sales.  This is at par to its historical average Price to Sales Ratio of 5.8 times.
Is the stock fairly valued? One should not just look at one indicator to determine the fair value of a stock.
ProThinker believes in using a combination of valuation methods to decide whether a stock is over or undervalued? The five ratios we use are Price to Earnings, Price to Sales, Price to Cash Flow, Price to Book and Dividend Yield. We use multiple methods to value a stock because each has its benefits as well as shortcomings. Price to Earnings and Price to Cash Flow Ratios relate stock price to profitability but are meaningless when the comany has negative earnings or cash flows. Price to Sales Ratio is more stable because sales are never negative. However, this does not tell us whether the company is able to sell profitably. Price to Book Ratio gives us an indication as to how much we are paying for the company’s assets but it is not directly related to the company’s profitability. Dividend Yield cannot be used for companies that are paying little to no dividends.
While it is important to value stocks based on multiple valuation methods, this often leads to differing views on valuation. One indicator may suggest that a stock is overvalued while another suggest that it is undervalued. This does not help an investor who needs to make a definite decision whether to buy, hold or sell the stock. That is why we advocate the use of a Composite Valuation Indicator, which is derived from the best combination of the five indicators above. A Composite Valuation Indicator will give you ONE conclusion on whether a stock is under or over valued.
To find out more about our valuation methodology, click here. 
Source of Data: Charts are from ProThinker Stock Report. Company description, historical financial statements data and price data are from gurufocus.com. Estimates are from gurufocus and/or 4-traders.com – Thomson Reuters.
Disclaimer: This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither ProThinker nor any other party guarantees its accuracy or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of ProThinker. Copyright(c) 2018. All rights reserved.

 

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