Bangalore, based in India Infosys Limited (INFI) and Paysafe Limited based in London (PSFE) are two leading players in the information technology (IT) services industry. Based in Bangalore, India, INFY provides consulting, technology, application development and management, outsourcing, engineering and management of next-generation digital products and services. It serves the Financial Services, Life Sciences, Healthcare, Manufacturing, Retail, Logistics, Communications, Telecom OEM, Media, Energy and Utilities sectors. . By comparison, PSFE provides digital commerce solutions to e-businesses, SME merchants and consumers through its Paysafe network. He focuses on iGaming and emerging markets, including stock, currency and crypto trading, direct marketing, travel and entertainment, in-app payments and digital goods.
Following the rapid digitization of various industries, increasing adoption of cloud-based services, big data storage and automation of various business operations has been driving the growth of the technology services industry. information. Rising business IT spending and the growing need for consulting services are expected to help IT services companies thrive.
Investor interest in this space is evident in Vanguard Information Technology ETFs (TGV) Returns of 6.8% over the past nine months versus SPDR S&P 500 Trust ETFs (TO SPY) Gains of 5.9%. The North American IT services market is expected to grow at a pace 7.6% CAGR to reach $660.9 billion by 2026. Thus, INFY and PSFE should benefit.
But while shares of PSFE are down 78.1% over the past year, INFY has gained 28.5%. INFY is also a clear winner with gains of 3.7% over PSFE’s negative returns in terms of last six months performance. But which of these actions is a better choice now? Let’s find out.
On December 14, 2021, Finnish pharmaceutical company Orion Corporation chose INFY to transform its ERP and scheduling platforms, improve employee experience and drive business value realization. INFY’s offering of standardized SAP best practices will enable informed decision-making and end-to-end supply chain visibility at reduced operating costs. Offering these services should allow Orion to maintain a long-term partnership with INFY.
On November 25, 2021, PSFE partnered with Huawei Technologies Co., Ltd., one of the world’s leading providers of information and communication technology infrastructure and smart devices, to deploy the payment solution online cash “paysafecard” from PSFE as an alternative payment method in the Huawei App Gallery. With the paysafecard account, consumers can use cash to purchase goods and services online simply and securely. This should allow PSFE to expand its customer base.
Recent financial results
INFY’s revenue for its third quarter of fiscal 2022, ended December 31, 2021, increased 20.9% year-over-year to $4.25 billion. The company’s gross profit was $1.39 billion, up 12.3% from the prior year period. Its operating profit was $998 million, an increase of 11.8% over its value the previous year. INFY’s net income was $774 million for the quarter, indicating a 9.8% increase over the prior year period. And its EPS rose 5.9% year-over-year to $0.18. The company had $2.15 billion in cash and cash equivalents as of December 31, 2021.
For its third quarter of fiscal 2021, ended September 30, 2021, PSFE’s revenue decreased slightly year-over-year to $353.59 million. The company’s non-GAAP gross profit was $208.73 million, down 5.2% from the prior year period. Its operating loss was $301.18 million, indicating an increase of 7692.6% over the prior year period. PSFE’s net loss was $147.20 million for the quarter, representing a 286.1% year-over-year increase. Its loss per share narrowed 33.3% year over year to $0.20. The company had $262.27 million in cash and cash equivalents as of September 30, 2021.
Expected financial performance
Analysts expect PSFE’s EPS to grow 16.4% year-over-year in fiscal 2022, ending March 31, 2022, and 15.5% in fiscal 2023. Its revenue is expected to grow 137% year-over-year in fiscal 2023.
By comparison, PSFE’s EPS is expected to remain negative in its fiscal 2021, which ended December 31, 2021, and fiscal 2022. Its revenue is expected to grow 4.5% year-over-year. in fiscal year 2022.
In terms of EV/forward sales, INFY is currently trading at 5.67x, which is 82.3% higher than PSFE’s 3.11x. In terms of forward EV/EBITDA, PSFE’s 10.62x compares to INFY’s 21.36x.
INFY’s revenues over the last 12 months represent nearly 10.5 times those of PSFE. INFY is also more profitable, with 23.8% EBIT margin against 4.7% for the PSFE.
Additionally, INFY’s net income margin and return on equity of 18.6% and 30.3%, respectively, compare favorably to the negative values of PSFE.
While INFY has an overall rating of B, which translates to Buy in Our Own POWR Rankings system, PSFE has an overall rating of D, equivalent to a sale. POWR ratings are calculated by considering 118 separate factors, each weighted to an optimal degree.
INFY has an A rating for quality, consistent with its industry-leading profitability ratios. INFY’s 18.6% year-over-year net income margin is 186.4% higher than the industry average of 6.5%. PSFE was rated D for quality, which is in line with its negative net income margin over the past 12 months.
In terms of sentiment, INFY was rated B, which is in line with higher analyst estimates for its revenue growth. INFY revenue is expected to be $4.33 billion for the next quarter, ending June 30, 2022, representing a 14.4% increase year-over-year former. However, PSFE’s C rating for Sentiment is in line with analysts’ lower earnings estimates. The company’s revenue is expected to decline 3.9% from the prior year period to $362.73 million for the next quarter, ending March 31, 2022.
Of the 11 A-rated shares Outsourcing – Technical Services industry, INFY is ranked #4.
PSFE is ranked #49 out of 53 C-rated stocks Consumer Financial Services industry.
Beyond what we’ve stated above, our POWR rating system also rated INFY and PSFE for growth, value, momentum, and stability. Get all INFY odds here. As well, Click here to see additional POWR ratings for PSFE.
The continued adoption of remote work structures and increased spending on IT services should benefit both INFY and PSFE. However, we think better analyst sentiment and higher profitability make INFY a better buy here.
Our research shows that the odds of success increase when betting on stocks with an overall POWR rating of Buy or Strong Buy. Click here to access top-rated stocks in the Outsourcing – Tech Services sector, and here for those in the consumer financial services industry.
INFY shares were trading at $23.49 per share on Monday afternoon, up $0.83 (+3.66%). Year-to-date, the INFY is down -7.19%, compared to a -5.64% rise in the benchmark S&P 500 over the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a particular interest in researching market inefficiencies. She is passionate about educating investors, so they can succeed in the stock market. Following…