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TCS Vs Infosys; Which Stock To Buy After Q2 Numbers?
Two of India's largest Software Services Providers, Tata Consultancy Services and Infosys, have both declared their Q2 numbers. There have been areas where Infosys has outperformed TCS and places where TCS has beaten Infosys.
Infosys Vs TCS In Numbers
| TCS | Infosys | |
| Revenues | Rs 27,168 crores | Rs 15,635 crores |
| Net profits | Rs 6055 | Rs 3398 crores |
| Dollar Revenue growth in constant currency terms | 3.90% | 6.90% |
| Guidance | Does not give guidance | 6.4-8.4 percent |
| Attrition rate | 16.20% | 19.90% |
| EBIT Margin | 26.70% | 25.50% |
Infosys' results, were slightly better than estimates on revenue front, margin front and profits front. The only reason that rattled the market was the dollar revenue guidance, which was lowered for the full year 2015-16. This had a lasting impact on the stock. The management also sees slightly challenging 2 quarters going forward.
Foreign brokerages firm like Nomura, Barclays and Morgan Stanley have a "buy" rating on the Infosys stock.
As far as TCS is concerned investors were very disappointed with revenue in constant currency terms. The dollar revenues which was placed at $4156 million was also way below estimates.
However, there are also some positives from the TCS results. One is that business from Latin America is improving, as comments from the management revealed. The other is that the digital business has shown double digit growth and is gathering pace.
The management does see the next two quarters as being weak, which traditionally is always the case with IT companies.
In fact, the management of both, Infosys and TCS did not sound any alarm as far as business prospects are concerned going forward.
How shares of Infosys have reacted after Q2 numbers?
Shares of Infosys after hitting a high of Rs 1210, has dipped almost 8 per cent to Rs 1097, following the revenue guidance by the company. TCS has fallen almost 4.5 per cent since the results. Both the stocks have fallen significantly since the results and another 2-5 per cent decline cannot be ruled out.
Most brokerages are more optimistic on Infosys than TCS, because the latter is commanding a premium in terms of valuation. They see the valuation gap between the 2 companies reducing going forward and Infosys outperforming.
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