IT Industry in India (Quantitative Analysis) of the Top 8 IT sector stocks listed on Indian stock exchange
This analysis is done with the only purpose of screening out good companies. Analysis done is completely on quantitative basis. No suggestions are being made to directly go and invest in the top scoring companies of this analysis.
Let’s study some IT companies, we have selected the following companies for study and analysis (the companies are selected on the basis of market cap, the top 8 companies of that sector according to market cap): –
|Sr. No.||Company Name||Market Cap (Rs. Crore)|
|6||Oracle Financial Services||₹30,826.0|
|7||L & T Infotech||₹29,422.5|
The top 100 companies according to the market capitalization are called as the large cap companies. Companies from 101 to 250 (based on market capitalization) are the mid-cap companies and the rest, that is above 250 are the small cap companies.
TCS, Infosys, Wipro, HCL Technologies and Tech Mahindra are the large cap companies. Oracle Financial Services, L&T Infotech and Mphasis are the mid-cap companies.
The analysis of these companies is going to be based on the following parameters. They are as follows: –
- Price-to-Earnings (PE) Ratio
- Return On Capital Employed (ROCE)
- Return On Equity (ROE)
- Debt to Equity Ratio (DE Ratio)
- 5 Years Sales Growth
- 5 Years Net Profit Growth
These parameters play an important role in the analysis of any company. This does not mean that one should be dependent only on these, but these parameters are crucial for initial screening.
First, we have given the companies their ranks and then accordingly we have assigned scores to those companies from 1 to 8, where 1 being the least and 8 being highest score. (total number of companies taken here are 8, that’s why the mentioned scoring card)
|Sr. No.||Company Name||PE Ratio||Rank||Score|
|6||Oracle Financial Services||24.12||7||2|
|7||L & T Infotech||22.01||6||3|
PE ratio is nothing but what price an investor is paying for 1 rupee of earning.
The company which has the highest PE ratio has been given number 8 rank and the company which has the lowest PE ratio has been given number 1 rank.
But the company which has the highest PE ratio has been given the lowest score.
TCS has the highest PE ratio and thus got number 8 rank and scored point 1. HCL Technologies has the lowest PE ratio and thus scored number 8 rank and a score of 8.
|Sr. No.||Company Name||ROCE||Rank||Score|
|6||Oracle Financial Services||46.14%||1||8|
|7||L & T Infotech||39.50%||3||6|
The company which has the highest ROCE has the highest rank and has also been given the highest points. And the company which has the lowest ROCE has the lowest rank and has also been given the lowest score.
Oracle Financial Services has the number 1 rank and scored 8 points. And Wipro has the lowest rank (8th) and scored 1 point.
|Sr. No.||Company Name||ROE||Rank||Score|
|6||Oracle Financial Services||31.01%||1||8|
|7||L & T Infotech||30.19%||2||7|
ROE has been analyzed on the same basis as ROCE.
The company which has the highest ROE has the highest rank and has also been given the highest points. And the company which has the lowest ROE has the lowest rank and has also been given the lowest score.
Here too, Oracle Financial Services ranked 1st as it had the highest ROE and thus scored 8. But here, Mphasis ranked 8th as it had the lowest ROE and thus scored 1.
|Sr. No.||Company Name||DE Ratio||Rank||Score|
|6||Oracle Financial Services||0||1||8|
|7||L & T Infotech||0||1||8|
The company which has the highest DE ratio has the least score and the company with lowest DE ratio has the highest score.
TCS, Infosys, Oracle Financial Services and L&T Infotech being 0-debt companies have scored 8. Wipro has the highest DE ratio and has thus scored 1.
5 Years Growths
|Sr. No.||Company Name||5 Years Sales Growth||Rank||Score|
|6||Oracle Financial Services||5.44%||7||2|
|7||L & T Infotech||13.66%||4||5|
|Sr. No.||Company Name||5 Years Net Profit Growth||Rank||Score|
|6||Oracle Financial Services||2.83%||7||2|
|7||L & T Infotech||13.5%||3||6|
The company with the highest 5 Year CAGR in Sales and Net Profit get the highest rank and thus gets the highest score. And Vice-Versa.
Tech Mahindra has the scored 8 in both, as it has the highest 5 years sales & net profit growth. And Mphasis has scored 1 in both, as it has the lowest 5 years sales & net profit growth.
|Rank||Company Name||Final Score|
|2||L & T Infotech||35|
|6||Oracle Financial Services||29|
HCL Technologies is on the 1st position with 36 points, L&T Infotech on 2nd with 35 points, TCS on 3rd with 33 points and Mphasis is on the last position, that is 8th with just 12 points.
The point here is to focus on the fundamentals of the company. Here, we have analyzed the company based on their current fundamentals. Also, the qualitative analysis of these companies will provide with a better outlook towards them
And quantitative analysis along with qualitative analysis will give a better understanding of which company is worth investing from here on.
- We are not, in any case, suggesting buying stocks of any of the companies mentioned above. We have just provided a study on these companies.
- All the data used is of Trailing Twelve Month (TTM)