Luxoft Holding, Inc. – Value Analysis (NYSE:LXFT) : September 28, 2016

Capitalcube gives Luxoft Holding, Inc. a score of 72.

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

Investment Outlook

Luxoft Holding, Inc. has a fundamental score of 72 and has a relative valuation of NEUTRAL.

Fundamental Score

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Company Overview

  • Compared to peers, relative underperformance over the last year is in contrast with the more recent outperformance.
  • Luxoft Holding, Inc. Class A’s current Price/Book of 3.45 is about median in its peer group.
  • We classify LXFT-US as Harvesting because of the market’s relatively low growth expectations despite its relatively high returns.
  • LXFT-US‘s median net profit margins and relatively high asset efficiency give it some operating leverage.
  • Change in the company’s annual revenues seems to be coming at the expense of earnings.
  • 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 margins are around the peer medians and do not suggest any benefit from a pricing or an operating cost advantage versus peers.
  • While LXFT-US‘s revenue growth in recent years has been above the peer median, the stock’s P/E ratio is less than the peer median suggesting that the company’s earnings may be peaking and the market expects a decline in its growth expectations.
  • 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 0.02% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 1.32%), and a well-cushioned interest coverage level of 817.04x, 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 recent year-end.

  • LXFT-US‘s interest coverage has declined 181.96 points from last year’s high but remains above its five-year average interest coverage of 248.14.
  • The decrease in its interest coverage to 817.04x from 999x (in 2016) was also accompanied by a decrease in its peer median during this period to 288.98x from 303.24x.
  • Interest coverage fell 167.69 points relative to peers.
  • LXFT-US‘s debt-EV is similar to last year’s low of 0.02%, which compares to the 2014 high of 1.82%.
  • Compared to 2016, debt-EV has remained relatively stable for both the company (0.02%) and the peer median (1.32%).

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 (%)
Computer Sciences Corporation 34.35 1.23 2.69 37.06
EPAM Systems, Inc. 1.32 6.23 0 363.05
Infosys Limited Sponsored ADR N/A 3.54 No interest exp 999
Accenture Plc 0.04 1.42 288.98 15600.1
Cognizant Technology Solutions Corporation Class A 2.91 3.66 123.57 212.61
Luxoft Holding, Inc. Class A 0.03 3.32 817.04 12139.21
Peer Median 1.32 3.43 288.98 681.02
Best In Class 0.03 6.23 No interest exp 15600.1

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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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