A ‘Blue-chip’ stock is generally defined as a stock of well-established and financially strong companies with an excellent reputation. Moreover, these companies have a long operating history, decent earnings, and pay dividends to their investors on a regular basis.
Here in this article, we will look at one such Bluechip stock with an upside potential of around 37 percent:
Infosys Limited is a leading provider in the Information Technology (IT) industry, Infosys Limited offers traditional services such as managed services and cloud infrastructure services, business process outsourcing as a service (BPaaS), and consulting services. The company earns more than 60 percent of its revenues from the North-American markets.
With a market capitalization of Rs 5,33,922 crores, the company’s shares are currently trading at Rs 1,287. The company, in totality, paid a dividend of Rs 34 in FY2022-2023, and, on the basis of the same, the dividend yield comes to a decent 2.61 percent.
The company’s scrip has a strong presence keeping aside the short-term fall the company’s stock faced due to underperforming results and recessionary indicators in the revenue-generating international segments.
Having a glance at the financials of the company, the basic operational parameters such as the operating revenues as well as net profits have shown decent growth with the former increasing from Rs 1,21,641 crores during FY21-22 to Rs 1,46,767 crores in FY22-23 and the latter, during the same time horizon, moved from Rs 22,146 crores to Rs 24,108 crores.
The profitability ratios, in congruence with the movement shown above, have reported an increase with the return on equity (ROE) increasing from 29.34 percent during FY21-22 to 31.95 percent in FY22-23. Likewise, the return on capital employed (ROCE), keeping the timeframe the same, took a shift from 35.96 percent to 38.79 percent.
The latest shareholding data available for the March 2023 quarter exhibits the Promoters holding a 15.14 percent stake, and Foreign Institutional Investors (FIIs) holding a 35.09 percent stake in the company.
Having a positive outlook for the company, BOB Capital Markets gave a ‘Buy’ recommendation on the stock with a target price of Rs 1,760 indicating an upside of 37 percent as compared to the current prices prevailing in the market.
The rationale behind providing such a recommendation is pertaining to the robust cash conversion, growth in the ‘digital revenue’ space, etc.
Written by Amit Madnani
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