EPAM Systems, Inc. (NYSE: EPAM)

Sector: Technology Industry: Information Technology Services CIK: 0001352010
Market Cap 11.63 Bn
P/B 3.12
P/E 31.31
P/S 2.20
ROIC (Qtr) 9.78
Div Yield % 0.00
Rev 1y % (Qtr) 19.43
Total Debt (Qtr) 155.22 Mn
Debt/Equity (Qtr) 0.04

About

EPAM Systems, Inc., often recognized by its ticker symbol EPAM, operates in the technology industry as a leading global provider of digital engineering, cloud, and artificial intelligence-enabled transformation services. The company also serves as a premier business and experience consulting partner for both established enterprises and ambitious startups. EPAM's primary business activities encompass software engineering, cloud and artificial intelligence-enabled transformation services, and business and experience consulting. With a presence in...

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Price action

Investment thesis

Bull case

  • Strong operating cash flow of 502.30M provides robust 3.24x coverage of total debt 155.22M, indicating excellent debt servicing capability and financial flexibility.
  • Healthy cash reserves of 1.24B provide 30.63x coverage of short-term debt 40.46M, demonstrating strong liquidity position and minimal refinancing risk.
  • Strong tangible asset base of 3.21B provides 20.71x coverage of total debt 155.22M, indicating robust asset backing and low credit risk.
  • Robust free cash flow of 459.11M exceeds capital expenditure of 43.19M by 10.63x, indicating strong organic growth funding capability.
  • Operating cash flow of 502.30M provides solid 0.60x coverage of current liabilities 835.26M, showing strong operational health.

Bear case

  • Operating cash flow of 502.30M barely covers its investment activities of (878.68M), with a coverage ratio of -0.57, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Cash reserves of 1.24B provide limited coverage of acquisition spending of (858.44M), which is -1.44x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
  • The company's operating cash flow of 502.30M shows concerning coverage of stock compensation expenses of 176.32M, with a 2.85 ratio indicating potential earnings quality issues.
  • Free cash flow of 459.11M represents just -208.50x of debt issuance (2.20M), suggesting concerning reliance on leverage rather than internal cash generation for growth.
  • Operating cash flow of 502.30M is outpaced by equity issuance of (396.65M) (-1.27 ratio), indicating concerning reliance on equity markets for funding operations.

Peer comparison

Companies in the Information Technology Services
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 IBM International Business Machines Corp 279.99 Bn 35.41 4.28 66.57 Bn
2 ACN Accenture plc 168.17 Bn 22.09 2.38 8.20 Bn
3 INFY Infosys Ltd 74.96 Bn 23.74 3.89 -
4 CTSH Cognizant Technology Solutions Corp 41.45 Bn 19.48 1.99 1.17 Bn
5 FIS Fidelity National Information Services, Inc. 35.21 Bn 231.62 3.36 13.00 Bn
6 WIT Wipro Ltd 29.93 Bn 19.70 2.97 1.95 Bn
7 BR Broadridge Financial Solutions, Inc. 26.38 Bn 28.51 3.74 3.28 Bn
8 LDOS Leidos Holdings, Inc. 23.72 Bn 16.88 1.37 5.23 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 2.22 1.44
EV to Cash from Ops. EV/CFO 21.41 5.63
EV to Debt EV to Debt 69.29 8.06
EV to EBIT EV/EBIT 21.55 -4.05
EV to EBITDA EV/EBITDA 16.09 -0.52
EV to Free Cash Flow [EV/FCF] EV/FCF 23.43 -1.66
EV to Market Cap EV to Market Cap 0.92 1.35
EV to Revenue EV/Rev 2.03 57.14
Price to Book Value [P/B] P/B 3.12 3.34
Price to Earnings [P/E] P/E 31.31 -5.47
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 0.00 -0.83
Dividend Payout Ratio % Div Payout % (Qtr) 0.00 0.66
Dividend per Basic Share Div per Share (Qtr) 0.00 0.47
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 0.00 6.24
Interest Coverage Interest Coverage 0.00 -319.17
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -63.51 -253.62
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) -39.15 114.15
Dividend Growth (1y) % Dividend Growth (1y) % 0.00 35.23
EBIAT Growth (1y) % EBIAT 1y % (Qtr) -17.19 -22.49
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 2.05 -25.03
EBIT Growth (1y) % EBIT 1y % (Qtr) -13.12 -82.44
EBT Growth (1y) % EBT 1y % (Qtr) -13.12 97.07
EPS Growth (1y) % EPS 1y % (Qtr) -15.62 147.29
FCF Growth (1y) % FCF 1y % (Qtr) -20.00 -8,638.64
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 7.02 -8.24
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 1.09 0.78
Cash Payout Ratio Cash Payout (Qtr) 0.00 0.01
Cash Ratio Cash Ratio (Qtr) 1.48 0.66
Current Ratio Curr Ratio (Qtr) 3.02 2.12
Debt to Equity Ratio Debt/Equity (Qtr) 0.04 0.88
Interest Cover Ratio Interest Cover Ratio 0.00 -319.17
Times Interest Earned Times Interest Earned 0.00 -319.17
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 12.50 -550.76
EBIT Margin % EBIT Margin % (Qtr) 9.42 -775.74
EBT Margin % EBT Margin % (Qtr) 9.42 -827.89
Gross Margin % Gross Margin % (Qtr) 28.90 24.07
Net Profit Margin % Net Margin % (Qtr) 7.00 -830.34