Is Wall Street Undervaluing G Stock?
Here is why we think Genpact (G) deserves consideration as a value stock.
- Reasonable Revenue Growth: 7.4% LTM and 5.1% last 3 year average.
- Cash Generative: Nearly 11.4% free cash flow margin and 14.9% operating margin LTM.
- No Major Shocks: G has avoided any revenue collapses in the last 3 years.
- Modest Valuation: Despite encouraging fundamentals, G trades at a PE multiple of 14.7
- Opportunity vs S&P: Compared to S&P, you get lower valuation, higher LTM revenue growth, but lower margins
As a quick background, Genpact provides business process outsourcing and IT services across multiple industries globally, including CFO advisory and environmental, social, and governance (ESG) services.
| G | S&P Median | |
|---|---|---|
| Sector | Industrials | – |
| Industry | Data Processing & Outsourced Services | – |
| PE Ratio | 14.7 | 24.1 |
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| LTM* Revenue Growth | 7.4% | 5.1% |
| 3Y Average Annual Revenue Growth | 5.1% | 5.3% |
| Min Annual Revenue Growth Last 3Y | 3.8% | -0.1% |
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| LTM* Operating Margin | 14.9% | 18.7% |
| 3Y Average Operating Margin | 14.2% | 17.9% |
| LTM* Free Cash Flow Margin | 11.4% | 13.4% |
*LTM: Last Twelve Months
But do these numbers tell the full story? Read Buy or Sell G Stock to see if Genpact still has an edge that holds up under the hood.
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That is one way to look at stocks. Trefis High Quality Portfolio evaluates much more, and is designed to reduce stock-specific risk while giving upside exposure
Stocks Like These Can Outperform. Here Is Data
For 65 similar value stocks chosen as of mid 2024, consider the following stats for the subsequent 1 year period.
- Average peak return of 39.3% vs 14.4% for S&P, with maximum peak return of 133%
- Win rate of 60%; win rate represents % of stocks with positive return
- Average 1-year return of 14.6%, similar to S&P’s despite tariff instability
But Consider The Risk
That said, Stock G isn’t immune to big drops. It fell over 64% in the Global Financial Crisis, nearly 50% during the Covid pandemic, and around 40% in the inflation shock. Even the smaller 2018 correction wiped out about 25% from its peak. Solid fundamentals matter, but when the market turns, losses like these remind you that risk is always there.
But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read G Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.
The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.