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Should You Investigate EPAM Systems, Inc. (NYSE:EPAM) At US$298?

Today we're going to take a look at the well-established EPAM Systems, Inc. (NYSE:EPAM). The company's stock led the NYSE gainers with a relatively large price hike in the past couple of weeks. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Today I will analyse the most recent data on EPAM Systems’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for EPAM Systems

What is EPAM Systems worth?

EPAM Systems is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 56.04x is currently well-above the industry average of 32.63x, meaning that it is trading at a more expensive price relative to its peers. But, is there another opportunity to buy low in the future? Given that EPAM Systems’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from EPAM Systems?

earnings-and-revenue-growth
earnings-and-revenue-growth

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 81% over the next couple of years, the future seems bright for EPAM Systems. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? It seems like the market has well and truly priced in EPAM’s positive outlook, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe EPAM should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on EPAM for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for EPAM, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into EPAM Systems, you'd also look into what risks it is currently facing. While conducting our analysis, we found that EPAM Systems has 2 warning signs and it would be unwise to ignore these.

If you are no longer interested in EPAM Systems, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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