On Friday, Tata Consultancy Services Ltd. (NS:TCS:IN) received an upgraded stock rating from a prominent market analyst at Jefferies. The analyst shifted the rating from Hold to Buy and increased the price target to INR4,615 from INR4,030. The upgrade comes as a response to TCS's first-quarter results, which surpassed estimates, signaling a potential turnaround for the company.
The analyst highlighted several key factors contributing to the positive outlook for TCS, including a return to growth in its significant verticals and markets. Additionally, the company's net hiring reached a seven-quarter peak, which the analyst views as indicative of an emerging revival within the organization. With these developments, the firm has adjusted its revenue forecasts upward for Tata Consultancy Services.
Despite the increased revenue estimates, the earnings per share (EPS) projections were slightly modified. The analyst anticipates a compound annual growth rate (CAGR) of 7% for constant currency revenues and 10% for EPS over the fiscal years 2024 to 2027. This growth expectation is based on the company's performance and market position.
The valuation of TCS was also considered. The stock currently trades at a price-to-earnings (PE) premium of 29% over the Nifty, which is one standard deviation below its five-year average PE premium of 39%. The analyst believes that TCS presents a value opportunity compared to the broader market index.
The revised price target of INR4,615 is predicated on a 29x PE multiple, which aligns with the firm’s assessment of the company's financial prospects and market performance. This upgrade reflects a belief in TCS's potential for growth and a positive trajectory in the coming years.
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