Regaining glory

India's two largest IT services companies TCS and Infosys announced their quarterly numbers in July. After TCS announced its results, its stock was up by about 5.5 per cent. On the other hand, after Infosys announced its results, its stock was up by about 1.8 per cent. For long-term investors, quarterly gyrations should not matter much, but when the gap in market capitalisation between two companies in the same sector is over $60 billion, then it makes sense to go a little deeper and understand if Infosys can catch up. TCS' market capitalisation crossed the $100 billion mark in July, while currently Infy's market capitalisation is a little over $40 billion. TCS' price-to-earnings multiple is at 28, while that of Infosys is at 18. This suggests that there's enough headroom for Infy's multiple expansion if it manages to report higher growth and bigger deal wins. Typically, maximum wealth creation happens when one catches the stock when it is fairly priced or relatively undervalued. A fully-priced stock would not deliver great returns even if it continues on its growth trajectory. From

This article was originally published on September 12, 2018.