TCS Stock Price Analysis: Should You Stay Invested?

After recording a strong performance in the fourth quarter of FY 2019, the stock of Tata Consultancy Services (NSE: TCS) has begun the journey in this current fiscal at a slow pace. The company has reduced its order bookings following the stagnation of the clients.

Why TCS Stock is under pressure?

Once a burgeoning IT stock, has now come under pressure due to the slow business momentum, currency headwinds and new norms raised by the public shareholding.

The revenue of the company grew at 1.6 percent sequentially to $5,485 million in June 2019 quarter due to the slower momentum in the banking and finance, manufacturing and retail verticals. The operating margin of the company has reduced down to 24.2 percent due to unfavorable cross currency movement and wage increase.

What makes the outlook worrisome is client sluggishness. Since September 2018 quarter, the company had reported more than $100 billion clients in its portfolio. But the sad part is the client list is not growing. Even the share of TCS is traded at a higher rate as compared to its peers. The sluggish business momentum has made it difficult for the investors to stay invested in this stock.

Should you stay Invested?

Well, though the stock is facing a lot of pressure, but the company has world-class capabilities and is betting high on its patented technology. Till date, the company has filed 4,596 patents as compared to its peers Wipro (2200) and HCL.  This stems towards the fact the company is giving a lot of impetus to creativity and innovation.

As an IT player, TCS has adopted the best practices to drive customer satisfaction. The company has partnered itself with All India Council for Technical Education to equip the students with career skills.

The company revenue has grown by 11.4 percent year-on-year to Rs 38,172 crore which is 10.6 percent higher in constant currency terms. The profits have increased to 21.3 percent to Rs 8,131 crore better than the analyst expectations. The company has declared Rs 5 dividend per equity share to the shareholder. The company has recently added a net of 12,356 employees, which is the highest in the last 5 years.

Though the stock is muted in terms of growth and performance but the fundamentals of the stock are rock-solid and the customers should stay invested in it.