While Genpact Limited (NYSE:G) might not have the largest market cap around , it saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. The company is now trading at yearly-high levels following the recent surge in its share price. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock's share price. But what if there is still an opportunity to buy? Let's examine Genpact's valuation and outlook in more detail to determine if there's still a bargain opportunity.
Is Genpact Still Cheap?
Great news for investors – Genpact is still trading at a fairly cheap price according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. In this instance, we've used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock's cash flows. we find that Genpact's ratio of 10.62x is below its peer average of 27.98x, which indicates the stock is trading at a lower price compared to the Professional Services industry. However, given that Genpact's share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from Genpact?
Future outlook is an important aspect when you're looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it's the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a negative profit growth of -5.8% expected over the next couple of years, near-term growth certainly doesn't appear to be a driver for a buy decision for Genpact. This certainty tips the risk-return scale towards higher risk.
What This Means For You
Are you a shareholder? Although G is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. We recommend you think about whether you want to increase your portfolio exposure to G, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you've been keeping an eye on G for a while, but hesitant on making the leap, we recommend you research further into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
If you'd like to know more about Genpact as a business, it's important to be aware of any risks it's facing. To that end, you should learn about the 2 warning signs we've spotted with Genpact (including 1 which shouldn't be ignored).
If you are no longer interested in Genpact, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
