TCS - Fundamental Analysis: Financial Health & Valuation

Last Updated Time : 05 Nov 25, 7:43 am

Fundamental Rating: 4.4

💻 Tata Consultancy Services Ltd (TCS) stands out for its exceptional capital efficiency, global scale, and consistent profitability, though valuation and growth metrics suggest a balanced entry strategy.

📈 Positive

• 📊 Return Metrics: ROCE of 78.4% and ROE of 65.0% reflect world-class capital efficiency.
• 📈 EPS Strength: ₹131 supports long-term earnings visibility and dividend sustainability.
• 💸 Dividend Yield: 1.96% offers stable passive income for long-term investors.
• 📉 Low Leverage: Debt-to-equity ratio of 0.11 ensures financial resilience.
• 🌍 Business Model: Global IT services leader with diversified revenue across geographies and verticals.

⚠️ Limitation

• 💰 PEG Ratio: 2.89 suggests valuation may be stretched relative to growth.
• 📉 Profit Dip: PAT declined slightly from ₹12,552 Cr. to ₹12,486 Cr. QoQ.
• 📉 FII Outflows: FII holdings declined by 1.15%, reflecting cautious foreign sentiment.
• 📉 Volume Drop: Current volume below weekly average, indicating reduced market activity.
• 📉 Technical Resistance: Trading near 50 DMA and below 200 DMA, suggesting consolidation.

📉 Company Negative News

• Stock down nearly 32% from 52-week high, reflecting valuation compression.
• Minor sequential profit decline and reduced foreign investor participation.

📈 Company Positive News

• Consistent quarterly PAT above ₹12,000 Cr. and strong EPS performance.
• Expansion in AI, cloud, and digital transformation services enhances long-term growth visibility.
• Positive MACD and RSI suggest technical stability and potential upside.

🏭 Industry

• IT services sector benefits from global digital transformation, cloud migration, and enterprise automation.
• Industry P/E of 29.4 reflects moderate valuation norms and growth expectations.
• Peers include Infosys, Wipro, HCLTech, and Tech Mahindra.

🧾 Conclusion

• 📉 Entry Zone: ₹2,950–₹3,050 could be a favorable accumulation range based on DMA and RSI levels.
• 📈 Long-Term View: Hold for 5+ years; strong fundamentals and global leadership support sustained compounding.
• 🔍 Valuation Watch: Consider phased entry or wait for earnings acceleration to justify premium pricing.