A company is said to be ‘fundamentally strong’ if it portrays a specific set of characteristics such as strong and consistent financials, lower leverage ratios, and many more.
Listed below is one such fundamentally strong stock associated with the business of providing IT-enabled Services that one should buy now for a potential upside of more than 25 percent:
Cigniti Technologies Limited:
With a market capitalization of Rs 2,973.12 crores, the stocks of Cigniti Technologies Limited opened their trading hour on Thursday at Rs 1,062 and currently trade at Rs 1,083.60, gaining approximately 1 percent as compared to the previous closing levels of Rs 1073.65 apiece.
Coming onto the quarterly financials of the company, the prime indicators of business such as operating revenues and net profits showed positive movements with the former increasing from Rs 439.52 crores during Q1FY23-24 to Rs 451.83 crores during Q2FY23-24, and, the latter, keeping the timeframe the same, rose marginally from Rs 44.56 crores to Rs 45.86 crores.
In addition, the company’s profitability metrics such as return on equity (RoE) as well as the return on capital employed (RoCE) portrayed a spike in numbers with the RoE rising from 22.12 percent during FY21-22 to 32.25 percent during FY22-23 and the RoCE taking a shift from 28.27 percent to 40.13 percent.
The net profit margins of the company, too, showed an upside movement from 7.39 percent during FY21-22 to 10.22 percent during FY22-23. The company’s debt-to-equity ratio, one of the most tracked leverage ratios, was reduced from 0.10 times to 0.05 times keeping the time horizon the same as above.
Keeping a purview of a year, the company’s stock has just delivered multibagger returns of around 101 percent to its shareholders, viz, if someone had invested Rs 1 lakh in December 2022, it would have converted to Rs 2.01 lakhs.
Keynote Capitals Limited, one of the well-known Brokerages based in India, gave a ‘Buy’ recommendation on the stocks of Cigniti Technologies Limited with a target price of Rs 1,401 indicating a potential upside of 29 percent as compared to the prevailing stock price level.
The investment rationale for providing such a recommendation pertains to the Brokerage’s belief in the company’s growth due to a shift towards moving up the value chain, integrating new offerings, cross-selling, etc.
According to the shareholding pattern data available for the quarter ended September 2023, the company’s Promoters hold a 33.46 percent stake, and the Foreign Institutional Investors, recently increasing their stake in the company, currently hold a 6.32 percent stake.
Cigniti Technologies Limited is a company based in India that is engaged in providing ‘independent software testing’ services. The company’s services include test data management, mobile testing, big data & analytics testing, e-commerce testing, and many more.
Written by Amit Madnani
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