- Date : 22/09/2022
- Read: 3 mins
Why is this mid-size IT stock outperforming the markets?
Tata Elxsi was founded in 1989 by Ratan Tata in Bengaluru (Bangalore) as of now, it has approximately 10,000 employees spanning more than 36 locations. The firm was started with the aim of promoting embedded systems, electronics, software, etc. Today, the company is recognised as a premier engineering service provider for various sectors like media, automotive, communications, healthcare, broadcast, etc. The company benefits from the mass adoption of new technologies like IoT, Robotics, Artificial Intelligence and augmented reality. Manoj Raghavan is the current CEO and MD of the company.
Stock price of Tata Elxsi
In September 2019, the stock was trading at Rs 700, and the current market price of the stock as of 21st September 2022 is Rs 8808. It has given returns of more than 1000%, and if you had invested Rs 1 Lakh in September 2019, you would have more than Rs 12 Lakhs today.
The company has most of its revenue (87%) from the transportation, broadcast and communications and medical sector. Around 84% of the revenues are from outside India, and the Indian revenues are just 16%. As far as the geography is concerned, 42% of the revenue is from the USA, and 30% of the revenue is from Europe. The most promising segment of the company is the growth expected from IoT. This is the primary reason the stock trades at very high PE multiples, as massive growth is expected in the coming years. The current PE ratio of the stock is 88, which is very high compared to other stocks in the market.
The stock is an investor favourite, and the stock has multiplied 200 times in the last 20 years. This phenomenal performance of the stock is continuing even now. The stock has increased 80 times in the last 10 years. This consistent performance of the stock keeps the investors excited about the company and its growth potential.
The revenue and the profit of the company have more than doubled in the last 5 years. Revenue has grown at a CAGR rate of 17%, whereas profits have grown at a CAGR of 25%. The company is debt free, and its growth potential of the company is good. With the increase in newer technologies like the IoT, the company’s growth prospects look bright. Although the healthcare sector revenues are just 14% of the total revenues, the company expects massive growth from the sector, which can take the revenues to 20% of the total revenues. The industry average PE ratio is 24. Although the stock looks overpriced from traditional metrics, the high growth prospects seem to justify the lofty valuations. The stock looks like a nice long-term bet.
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Tata Elxsi stock analysis - Fundamental analysis of Tata Elxsi
Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.