Stock To Buy: Multinational IT Company With Solid Financials & Great Dividends

Oracle Financial Services Software is a subsidiary of Oracle Corp, US and one of the top players in providing IT Services for the banking and insurance industry. The shares are a good pick at the current levels as they are largely undervalued.

Oracle Financial Services: Good on fundamentals

Oracle Financial Services Software has been consistently reporting a good set of numbers over the last few quarters. In fact, the company reported an EPS of Rs 190 for FY 2020-21 and over the next 1-year we believe that the company can report an EPS of Rs 220 or so.

Some of the IT Companies of similar size are being accorded a p/e of around 25 to 30 times and if we accord a similar p/e the stock should trade around the Rs 5500 to Rs 6000 levels. However, the stock of Oracle Financial Services is available at a p/e of just 16 times one year forward p/e offering good scope for appreciation.

Strong on dividend yields

Oracle Financial Services last year declared a dividend of Rs 200 per share. This means on the stock price of Rs 3700, the dividend yield works to around 5.41%. Even these days it is hard to find bank interest rates at these levels.

We believe that the company could also enhance dividends in the future as profitability improves. So, the stock if also a good pick in terms of its dividend yields. Buy the stock of the Oracle Financial Services if you are a long-term investor.

Strong growth likely for the IT industry

Sharekhan in a recent report said that the increasing IT spend on digital & cloud transformation initiatives by the enterprises across the industries is expected to maintain strong demand momentum over next 2-3 years.

"Demand remains robust, led by client's urgency to build a multifaceted digital core to stay relevant to its customers, increasing discretionary IT spend on new areas (including ESG, IoT, AI, 5G, and Cybersecurity) and legacy modernization. Cloud migration is expected to remain strong over next 2-3 years as only 30%+ workloads have moved to Cloud," the brokerage said in a recent report.

Disclaimer

Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article. It is always better to consult a professional advisor and seek professional help before investing.