Persistent Systems shares slip after nine days; here’s why

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Shares of Persistent Systems today fell after nine days of gains after JP Morgan downgraded the stock to neutral with a target price of Rs 4,100. The stock’s decline comes after a 31% rally in early October after it was upgraded to overweight by the brokerage. Since then Nifty IT has gained 14%.

Shares of Persistent Systems touched a low of Rs 4,220.8, down 2.86%, on the BSE. The stock of Persistent Systems was trading above the 5-day, 20-day, 50-day, 100-day and 200-day moving averages. The stock has declined 2.16% in one year and 13.39% in 2022. However, the stock has gained 14.75% in one month.

A total of 4,350 shares of the firm traded a turnover of Rs 1.85 crore in the morning session. The market cap of the firm fell to Rs 32,447 crore on BSE.

The stock touched a 52-week high of Rs 4,986.85 on Jan 3, 2022 and a 52-week low of Rs 3,091.65 on Sep 26, 2022 on BSE.

JP Morgan said shares of Persistent Systems are now trading at a premium to global peers EPAM, Endva and Globant despite similar earnings growth expectations. “We do not see any positive catalyst that could drive further re-ratings,” it said.

The brokerage believes that the stock is now valued at 32 times 1-year FWD PE with Reverse Discounted Cash Flows (DCF) estimates for 17% CAGR growth over the next 10 years.

Read also: Persistent Systems Stock Soared 4% After Second Quarter Earnings

In the second quarter of the current financial year, the IT solutions provider’s net profit increased by 4% to Rs 220.01 crore in Q2 September 2022 over 9.1% growth in revenue in Q1 June 2022.

On a year-over-year basis, Persistent Systems’ consolidated net profit climbed 36% and revenue grew 51.6% in the second quarter of September 2022 over the second quarter of September 2021.

The company’s EBITDA during the quarter stood at Rs 367.96 crore, up 10.4% quarter-on-quarter (QoQ) and 64% year-on-year (YoY). EBITDA margin stood at 18% in Q2 FY23. Profit before tax for the second quarter stood at Rs 295.60 crore, up 4.9% QoQ and 35.8% YoY.

Persistent Systems is engaged in the business of providing software products and technology services. The company provides a range of services including digital strategy and design, software product engineering, customer experience (CX) transformation, cloud and infrastructure, intelligent automation, enterprise information technology (IT) security and data and analytics.

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