I’m quite new to investing and slowly learning (while trying to avoid getting burned up).
I saw that this stock is going to publish earnings at the end of the US trading session and looks quite interesting, but I’m wondering if it’s too good to be true. The company is an IT consultancy/outsourcing similar to Infosys, but from Latin America.
At the moment is priced at $185, but has a guidance price from some analists between $195 and $250, with an average of $213. The company has a PE Ratio of 45; an EPS of 3.47 and has beaten all the earning forecast at least for the last 2 years.
I’m curious to know if there is any obvious reason why one wouldn’t invest in this company.
Thanks a lot!
I’ve done a little bit on Globant when I looked at it’s competition Endava. They’re basically outsourcing companies where smaller, less tech savvy companies contract out parts of their digital marketing to these companies and they go out to Latin America or Eastern Europe and produce the marketing at a much lower costs.
They have a few obvious risks that I spotted.
- Political instability.
- Civil instability.
- Big Tech Layoffs meaning tech folk are branching out.
- Marketing budgets reducing.
- Threat of war in Eastern Europe.
- Developing nations can increase wages quickly hampering the companies competitive edge.
- Inflation in developing markets.
- Wild FX fluctuations
Other than that, the valuation is a bit frothy, but that could improve rather rapidly of the company screwed down on expenses. (It currently and probably rightly, doesn’t want to.)
Thanks for the explanation. The points you raised are what I’m trying to learn: awareness of the context in which a company operates.
Grab yourself a copy of the investment checklist by Michael Shearn. An excellent book on what to look for when researching a company.