IT Outsourcers is one of the hottest sectors right now, and one stock we need to keep an eye on is EPAM Systems (EPAM). EPAM specializes in developing state-of-the-art websites and apps, such as this one for USA Network.
EPAM stock is rather young, it had its IPO in February 2012 and opened at $14. Since then the stock’s climbed all the way to $75 as profits have grown rapidly each year.
One Year Chart
EPAM has had a solid year. It’s sitting at its 52-week high even though the stock market has in a correction for much of the past two months. Profits have grown an average of 30% the past 4 qtrs, but last qtr the company had just 21% growth, and didn’t beat profit estimates as it had the prior 3 qtrs. Estimates show growth of +13% and +19% for the next 2 qtrs.
With a P/E of 28 I feel the stock is a bit high. Still, I like the 20% Estimated Long Term Growth Rate. We need to collect stocks like this for the Growth Portfolio.
Fair Value
My Fair Value on this stock is 25 times earnings, which equates to $67 a share. Now at $75, the stock is a bit high. We have been in a declining market the past two months, and EPAM hasn’t given potential investors a discount. That’s a sign of strength.
Sharek’s Take
EPAM Systems is the type of stock I should be looking at for the Growth Portfolio. Although its behaving well in a wicked market, the stock’s a little high for me to buy right now. It looks like profit growth has slowed from the 30% range to the 20% range and the P/E is high as well. EPAM had a median P/E of 13 in 2012, 18 in 2013 and 19 in 2014. I feel at 28x earnings the stock’s too high, and I would rather wait for a better entry point. EPAM will be on my radar.
View the Earnings Table here.View the Profit History here.
View the Ten Year Chart here.
