Critical Comparison: Infosys (INFY) versus Its Peers

Infosys (NYSE:INFY) is one of 271 public companies in the “IT Services” industry, but how does it contrast to its rivals? We will compare Infosys to related businesses based on the strength of its valuation, dividends, risk, analyst recommendations, institutional ownership, earnings and profitability.

Institutional and Insider Ownership

16.2% of Infosys shares are owned by institutional investors. Comparatively, 36.7% of shares of all “IT Services” companies are owned by institutional investors. 22.4% of Infosys shares are owned by company insiders. Comparatively, 20.5% of shares of all “IT Services” companies are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Analyst Recommendations

This is a summary of recent ratings and target prices for Infosys and its rivals, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Infosys	1	10	0	0	1.91
Infosys Competitors	1987	5636	9434	342	2.47

Infosys currently has a consensus price target of $11.79, suggesting a potential downside of 3.37%. As a group, “IT Services” companies have a potential upside of 25.42%. Given Infosys’ rivals stronger consensus rating and higher possible upside, analysts plainly believe Infosys has less favorable growth aspects than its rivals.

Profitability

This table compares Infosys and its rivals’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Infosys	16.21%	34.81%	20.72%
Infosys Competitors	-191.23%	-32.14%	-8.65%

Volatility & Risk

Infosys has a beta of 0.87, indicating that its share price is 13% less volatile than the S&P 500. Comparatively, Infosys’ rivals have a beta of 2.15, indicating that their average share price is 115% more volatile than the S&P 500.

Dividends

Infosys pays an annual dividend of $0.45 per share and has a dividend yield of 3.7%. Infosys pays out 55.6% of its earnings in the form of a dividend. As a group, “IT Services” companies pay a dividend yield of 2.3% and pay out 71.1% of their earnings in the form of a dividend. Infosys is clearly a better dividend stock than its rivals, given its higher yield and lower payout ratio.

Earnings & Valuation

This table compares Infosys and its rivals revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Net Income	Price/Earnings Ratio
Infosys	$20.16 billion	$3.31 billion	15.06
Infosys Competitors	$3.24 billion	$227.67 million	-29.83

Infosys has higher revenue and earnings than its rivals. Infosys is trading at a higher price-to-earnings ratio than its rivals, indicating that it is currently more expensive than other companies in its industry.

Summary

Infosys beats its rivals on 9 of the 15 factors compared.

About Infosys

Infosys Ltd. is a digital services and consulting company, which engages in the provision of end-to-end business solutions. It operates through the following segments: Financial Services, Retail, Communication, Energy, Utilities, Resources, and Services, Manufacturing, Hi-Tech, Life Sciences, and All Other. The company was founded by Dinesh Krishnan Swamy, Senapathy Gopalakrishnan, Narayana Ramarao Nagavara Murthy, Raghavan N. S., Ashok Arora, Nandan M. Nilekani, and S. D. Shibulal on July 2, 1981 and is headquartered in Bangalore, India.