Five Points to Figure Out if an IT Stock is Worth Investing In

The information technology sector is India’s most important sector and one of the country’s most significant sources of earnings. Currently, the industry contributes roughly 7.7% of GDP, and by 2025, it is predicted to contribute around 10%. India is presently the world’s leading provider of IT services. The country has a competitive advantage due to highly skilled and less expensive labor.

India is the world’s most popular sourcing location, accounting for around 55% of the worldwide service sourcing market, with an estimated value of USD 185–190 billion and 38% of the BPM sourcing market.

Some factors to consider when deciding on an IT stock are as follows:

1. IT businesses serve a variety of verticals, including banking and financial services, insurance, pharma, communications, media, and technology, energy and utilities, and manufacturing, to name a few.
2. Determine the revenue distribution by geography: IT firms provide services to countries worldwide, including the United States, Europe, and Asia. Investors should look at the revenue split between different nations and compare India’s currency exchange rate to foreign currency.
3. Identify the company’s financial performance: Look at the company’s performance over time and in comparison to its competitors by using metrics like ROE, ROCE, P/E ratio, cash flow from operations, and profit margin ratios, among others, to get a sense of the company’s financial position and whether its financials are strong enough to deal with difficult times.
4. An investor must also evaluate the company’s product offerings and order intake to determine the predicted revenue flows.
5. As a manner of returning money to shareholders, IT companies are known to pay out dividends and execute share buybacks regularly. Investors should evaluate the frequency and amount, as they can reflect earnings and investment return stability.

The portfolio companies to look for are as follows:

1. TCS

Tata Consultancy Services Ltd. is a company based in Mumbai, India. It is India’s second-biggest IT corporation by market capitalization and the world’s largest IT services provider. IT Services, Consultancy, Business Solutions, Digital Transformation, and IT Products and Platforms are only a few of the services offered by the organization.

Cloud-based computing, machine learning, AI, and Blockchain-based technology are among the new and developing technologies that the organization is exploring. In addition, BFSI is the company’s most lucrative revenue division, accounting for 40% of the total revenue. As a result, TCS Share Prices are often lucrative for investors.

2. Infosys

Infosys Limited is a company that provides information technology services. Infosys Ltd. is the country’s second-largest IT services firm. The company offers a comprehensive range of IT services to clients worldwide, in numerous verticals such as the United States, Europe, Asia, and the rest of the world.

The company has had solid financial performance over the last five years, with an average ROE of 24.31% and an operating profit margin of 27.53%. The top line has grown at a CAGR of 10% in the last five years, while the bottom line has grown at a CAGR of 7%. Infosys share prices have mostly witnessed growth in the share market.

While online investing in the stock market looks easy, it is important to analyze the sector, industry, company fundamentals, and technical indicators to generate good returns.