Dealmaker’s Diary: A “Value Add” Play on Our Digital Transformation

Alpesh Patel|September 19, 2024

The markets have jumped with glee after the Federal Reserve voted to cut interest rates by 50 basis points.

That mood is creating new opportunities…

Like with this undervalued $7 billion IT services company.

It’s helping with our economy’s digital transformation while providing critical support to its clients.

Plus… the stock is on the move and headed for a 40% gain in less than a year.

This the kind of research my clients pay thousands for… but you get it for FREE as a Total Wealth subscriber.

Get all the details on the company – including its ticker – in my latest video.

Click on the thumbnail below to watch.

 

TRANSCRIPT

Hello, friends. It’s the Dealmaker’s Diary and Stock of the Week time.

And I’ve got an exciting one for you. Well, they’re all exciting, aren’t they? But I think this one’s particularly exciting. Let me explain why…

Genpact Limited (G) is a global professional services firm. Nothing exciting there, you might think, except it’s in the field of digital transformation, which means taking old businesses and making them more digital, more ready for the modern AI age.

And the company goes beyond just business process outsourcing, which has, of course, been around for at least 30 years in its present form.

Genpact works across industries. That’s important for diversification, so financial services, healthcare, manufacturing, and the like. And because Genpact adds to the bottom line and top line, that means it’s not seen as a cost of doing business, but instead a “value-add” of doing business.

What really got me, as always, are the numbers.

Revenues, we’re looking at about $4.7 billion expected. It’s growing as well.

The market cap is $7 billion. It astounds me the number of companies that are not household name, yet are in the multibillion-dollar market capitalization. Genpact is one of them.

On my Growth-Value-Income rating, it’s a 7. Now remember, that’s my proprietary algorithm which weighs the valuation of a company, the growth of a company, the dividend yields. This is a 7. Anything which is 7, 8, 9, or 10 meets the minimum criteria for me.

For a company that’s in IT services and involved in the digital economy – although not strictly a tech company – it’s cheap because you’re paying 12.4 dollars to buy a share in this company for every future expected dollar of profit. The forecast P/E is 12.4. That’s relatively cheap for anybody involved in technology.

CROCI is 11.2. That’s a strong number. Go here to see how CROCI can boost returns in a portfolio.

Volatility is very low. I like that. Sortino and Alpha could be higher, but I’m going to give those a pass. I don’t need to delve into them because not everything needs to tick the box on the Dealmaker’s Diary. (I certainly look for them with my GVI Investor recommendations.)

Now let’s have a look at the stock.

Momentum on the monthly chart is trending up nicely.

I’m expecting that momentum to carry forward. I’m expecting this to go from just below the $40 mark and carry upward on that trend. Can it get to, say, $55-ish? Forty dollars to $55-ish? Well, that’s really the goal. Would it take 12 months? Ideally.

Now, one other thing which is helping is discount cash flow. It’s 60% undervalued.

Now, discount cash flow is not necessarily the most accurate measurement of valuation. It’s a “nice to have” if it’s there. If the other things are in place and it’s not there, I don’t mind.

But for me, it was really some of the key figures and then this momentum. Now that’s not necessarily guaranteed to continue going upward. It seems that the company has most definitely bottomed out around the $31 level, and should be going back up the way it did around 2020 all the way to 2022. That’s really what I’m looking for… a repeat of that period.

I hope you enjoyed that. I hope it was informational and educational, which is always my goal.

Thank you very much.