Luxoft Holding, Inc. – Value Analysis (NYSE:LXFT) : June 13, 2017

Capitalcube gives Luxoft Holding, Inc. a score of 69.

Our analysis is based on comparing Luxoft Holding, Inc. with the following peers – DXC Technology Co., EPAM Systems, Inc., Infosys Limited Sponsored ADR, Accenture Plc Class A and Cognizant Technology Solutions Corporation Class A (DXC-US, EPAM-US, INFY-US, ACN-US and CTSH-US).

Investment Outlook

Luxoft Holding, Inc. has a fundamental score of 69 and has a relative valuation of OVERVALUED.

Fundamental Score

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Company Overview

  • Considering peers, relative underperformance over the last year and the last month suggest a lagging position.
  • It trades at a lower Price/Book multiple (3.38) than its peer median (4.48).
  • The market expects LXFT-US to grow at about the same rate as the peers and to maintain the median returns it currently generates.
  • LXFT-US‘s median net profit margins and relatively high asset efficiency give it some operating leverage.
  • Changes in annual revenues (relative to peers) are better than the change in its earnings (relative to peers), implying the company is focused more on revenues.
  • Over the last five years, LXFT-US‘s return on assets has declined from above median to about median among its peers, indicating declining relative operating performance.
  • The company’s median gross margin and relatively low pre-tax margin suggest high operating costs versus peers.
  • While LXFT-US‘s revenues in recent years have grown faster than the peer median, the market gives the stock a P/E ratio that is around peer median suggesting that the market has some questions about the company’s long-term strategy.
  • The company’s level of capital investment seems appropriate to support the company’s growth.
  • LXFT-US has the financial and operating capacity to borrow quickly.

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Leverage & Liquidity

LXFT-US has the financial and operating capacity to borrow quickly.

  • With debt at a relatively low 0.03% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 0.03%), and a well-cushioned interest coverage level of 765.57x, LXFT-US can probably borrow quickly. We classify the company as Quick & Able in terms of its capacity to raise additional debt.
  • Of the 5 chosen peers for the company, only 4 of the stocks have an outstanding debt balance. Companies with no debt include INFY-US.

LXFT-US has maintained its Quick & Able profile from the prior year-end.

  • LXFT-US‘s interest coverage has declined 233.43 points from last year’s high but remains above its four-year average interest coverage of 305.33.
  • While its interest coverage decreased to 765.57x from 999x (in 2016), its peer median increased during this period to 342.40x from 303.24x.
  • Interest coverage fell 272.59 points relative to peers.
  • LXFT-US‘s debt-EV is similar to last year’s low of 0.02% and remains below the 2015 high of 1.82%.
  • Though its debt-EV has remained relatively stable at 0.03% compared to 2016, its peer median has decreased to 0.03% from 0.93% during this period.
  • Relative to peers, debt-EV rose 0.90 percentage points.

Access the detailed analysis for Luxoft Holding, Inc.

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
DXC Technology Co. N/A 1.1 1.16 24.26
EPAM Systems, Inc. 0.71 5.76 0 726.2
Infosys Limited Sponsored ADR 0 3.83 No interest exp 999
Accenture Plc Class A 0.04 1.29 342.4 19117.26
Cognizant Technology Solutions Corporation Class A 3.78 3.03 116.27 203.06
Luxoft Holding, Inc. Class A 0.03 2.64 765.57 21957.91
Peer Median 0.04 2.84 342.4 862.6
Best In Class 0.03 5.76 No interest exp 21957.91

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Company Profile

Luxoft Holding, Inc. operates as a provider of software development services and information technology solutions to a global client base consisting of multinational corporations. The company’s services include software development and support, product engineering and testing, and technology consulting. It provides its services to six industry verticals: Financial services, Travel and aviation, Technology, Telecom, Automotive and transport and Energy. The company was founded in March 2000 and is headquartered in Zug, Switzerland.


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