With gradual US and Europe recovery, the most likely beneficiaries are global IT service companies and the stock of top 10 IT solution providers are already reflecting the optimism. Most of them are at 52 week high and are trading at the higher end of the last 5 years valuation range.
However within IT space some companies, which have higher growth rates and superior return ratios, are commanding relatively much higher valuation than their peers. For instance TCS is trading at 27 times PE multiple vs it's closest comparative competitor Accenture which is trading at just 17 times based on trailing 12 months EPS. IBM the largest of the pack is trading at 12.4 times TTM EPS.
However within IT space some companies, which have higher growth rates and superior return ratios, are commanding relatively much higher valuation than their peers. For instance TCS is trading at 27 times PE multiple vs it's closest comparative competitor Accenture which is trading at just 17 times based on trailing 12 months EPS. IBM the largest of the pack is trading at 12.4 times TTM EPS.
TCS, with market value of $60 billion, is now the second most valuable company in the world after IBM which commands a market value of $202 billion. Accenture though larger in size than TCS in terms of revenue commands a market value of $50 billion. Having delivered more than 60% return this calender year, TCS is globally the most expensive stock in it's peer group. TCS has the highest market share in Indian IT industry in terms of revenue and has the market value equivalent to the market value of IT service companies in 2nd to 5th spot.
| Global IT companies valuation comparison (2013 - 2014) | ||
| Company | Market Cap ($/billion) | P/E Multiple* |
| IBM | 202.6 | 12.4 |
| TCS | 60.0 | 26.9 |
| Accenture | 50.6 | 17.1 |
| H P | 43.0 | 13.4 |
| Infosys | 27.3 | 19.0 |
| Wipro | 24.7 | 23.3 |
| Dell | 24.3 | 14.7 |
| Cognizant | 23.6 | 20.8 |
| Cap Gemini | 9.1 | 18.8 |
| Based on EPS in preceding 12-months | ||
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