Should Infosys and Wipro Trade at a Premium?

Infosys (INFY) and Wipro (WIT) are quoting at around 16x forward, and twice have even gone down to 13.5x forward.

This chart shows that there is no valuation premium for India’s IT leaders over the rest of the Indian market. Is that fair? Perhaps not. While other sectors like real estate and construction, capital goods and so on powered the last bull market, it does appear fair to say that India’s finest companies should command no valuation premium to the market.

While the IT story is now a decade old, and these companies are unlikely to spring positive surprises on the market (unless they make a significant inorganic move),  the fact remains these companies still have perhaps the most consistent growth story. They have among the best ROCE/ROE. In other words, their managements are responsible users of capital.

These companies should outperform in the current bear market.

Comments

[Zyx007:]

Agree. The baby is being thrown out with the bathwater.

2008 Aug 11 09:49 AM