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Three of the leading IT companies in India—TCS, Infosys, and Wipro—have already revealed their Q4 financial results. Everyone is wondering which stock to buy. Both TCS and Infosys stock prices showed excellent results in winning the deal, but Wipro faces unprecedented uncertainty in the demand environment.
TCS stock price consolidated earnings from operations increased by 3.6% YoY and by 1% QoQ to INR ₹ 61,237 for the fiscal year 2024 fourth quarter. At the same time, revenue in constant currency rose by 2.2% YoY.
The quarterly consolidated net profit was pegged at Rs.12,434 crore, which was a growth of 9.1 percent on a yearly basis and 12.4 percent sequentially.
In Q4 of this year, the operating margin of the company was up 150 bps YoY vs. last year to reach 26 percent, while the net margin hit 20.3 percent, representing an increase of 100 bps YoY.
Infosys reported a year-on-year growth of 30 percent in their bottom line for Q4FY24, with net profits coming thereof at ₹7,975 crores as against ₹6,134 crores in the quarter last year. This constant currency (CC) revenues in the amount of the previous period (YoY) stagnated and fell by 2.2 percent in the amount of the current (QoQ) reporting. The corporation saw a reduced operating margin of 0.9 percent and 0.4 percent YoY and QoQ respectively.
Wipro's consolidated net profit, which plummeted 8%, was reported to be ₹2,835 crore. Total income fell 4% year over year to Rs 22208.3 crores.
When deciding which stock to buy, the majority of investors and experts say that they prefer TCS to the other two tech stocks. This highlights that despite the problematic situation in the industry, TCS showed superior results compared with competitors. CTS management is optimistic about the financial year 2022; however, Infosys and Wipro have provided unimpressive guidance for the near future.
For deciding which stock to buy, one of the senior research leaders in Sharekhan by BNP Paribas, Sanjeev Hota, observes a more or less steady management commentary, albeit a problematic situation, for TCS, along with healthy Q4 results. Infosys, however, came up with unsatisfactory figures accompanied by a sheet below the policy for FY25.
Making it to the next quarter with a robust deal win run has been consistent across all IT service companies, which announced the results with a high TCV in their bag for TCS. TCS's profit-making indicator is aligned and is optimistic for a better financial year (FY25) when compared with its peers (Infosys and Wipro), whose weak-than-expected guidance reflects a continuation of challenge and bottlenecks in the near to medium term, as expressed by Hota.
Our most preferred stock in the tier-1 IT services segment would be TCS, owing to solid performances in Q4, deal wins momentum, and a more positive outlook for FY25 compared to other peers. TCS has relatively more tamper resistance when compared to other peers, given its capacity. Hota added that TCS's other peers are Infosys in this segment. And our pecking order of stocks among tier
Stating Swastika Investment as her case study, Pravesh Gour, Senior Technical Analyst, mentioned that TCS was far ahead of its peers in the overall result for Q4 financials. The ring-tagging of Infosys and Wipro's finances and the difficulty of completing two deals just before quarter closing was a red flag.
"Amid the most difficult business climate, we clearly see that TCS enjoys inimitable strength." The Tata Group Company, trading in regional markets along with a steady stream of deals over multiple years, achieved its name to exceed Infosys and Wipro profits. TCS is utilizing multitasking even more effectively, and it has also enhanced the commitment of the employees so as to generate higher margins on its customers' demands; this is what Gour confirms.
Nevertheless, Dhruv Mudaraddi, a researcher at Stoxbox, seems optimistic about the outlook of TCS.
He reported that Infosys and Wipro's sales were weak as the companies couldn't have ensured the timely ramping up of the deals and fell prey to reluctant, time-consuming scrutiny and investigation. Whilst TCS lived on the crutches of its megadeals, which provided it with healthy billing, it also made sure that its deal pipeline starved for many years of deals prospering.
To make their statement more convincing, Mudaraddi added, "This was clearly observed from the increase in efficiency and asset utilization to finally translate to the higher margins in the industry where consumer spending was in free fall. TCS had done this best through the expansion of their margins, even on a high base. We expect TCS to perform better than the other companies mentioned, and hence, they should be placed in investment portfolios.
Amit Goel, Pace 360's Co-Founder and Chief Global Strategist, noted that TCS has shown the utmost resilience in a market that remains suffocating.
"The Tata Group LLC has displayed overlapping ahead of a multi-year high new deal pipeline and immense growth in regional markets, helping it surpass both Infosys and Wipro. We recommend you buy TCS for the next year," said Goel.
For example, CA Vatsal Vinchhi, Equity analyst in the IT sector at Choice Equity Broking, said that discretionary spending accounts for a major revenue share for Infosys, which could easily predict higher growth in the future. Moreover, in terms of valuation, Infosys seems more attractive than its counterparts like TCS and Wipro.
The speaker, Vinchhi, identified that at the time when, TCS was trading at a PE ratio above its 5-year average PE ratio while Infosys was trading below such an average PE ratio. Consequently, as the economy recovered, Vinchhi opined that Infosys would be healthier in terms of profitability.
