When Is A Good Time To Buy Stocks? : Syntel

Summary

  1. Issuance of Special Cash Dividends
  2. Solid Financials with Rapid Growth
  3. Rising Demand for IT Services in Numerous Sectors
  4. Business Expansions

1. Syntel Inc (SYNT)

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Last Closed Price: $26.49
52 Week Low: $25.98

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Source: Reuters (Oct 14,2016)

2. What Business Syntel Inc (SYNT) Is In

 Syntel is a global provider of digital transformation services to companies. Syntel helps businesses grow by building efficient information technology and knowledge process services for firms.

Primary business focus:
1. Managed Services
2. Knowledge Process Outsourcing
3. Emerging Technologies and Innovation Services

Industry Focus:
1. Banking & Financial Services
2. Healthcare & Life Sciences
3. Insurance
4. Retail, Logistics & Telecom
5. Manufacturing

3. What Happened to Syntel Ltd (SYNT) Recently?

Special Cash Dividend

Syntel declared a special cash dividend of $15 per share in 12 September 2016, which is payable to shareholders on October 3, 2016. The special cash dividend will be funded by U.S. subsidiaries. Syntel also expects to recognize a one-time tax expense of $264M in the third quarter of 2016.

Due to the one-time issuance of special cash dividend and tax expense, Syntel is revising its outlook for 2016 Earnings Per Share (EPS), from $2.55 to $2.70 EPS to a loss of $0.60 to $0.75 EPS.

4. Financial Highlights

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Syntel’s financials look impressive with these 4 indicators on the uptrend.

Source: Guru Focus (14th Oct 2016)

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Syntel’s Income Statement above shows its Revenue, Net Income, EPS all are on the uptrend.

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Syntel’s Assets and Shareholder’s Equity are on the uptrend as well.

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Source: Morningstar (14th Oct 2016)

Free Cash Flow are on the uptrend with only a slight dip from $214M in 2014 to $207M in 2015.

4.1 Key Statistics

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Source: Guru Focus (14th Oct 2016)

ROE at 22.86% and ROA of 18.66% both looking incredibly healthy.

5. Industry Overview

5.1 Market Trends

Increasing Demand for IT Services in Healthcare Sector

The healthcare industry is constantly seeking for development in the quality of care while finding ways to drive cost lower to make healthcare more affordable to the general public.

Syntel focuses on providing a wide range of solutions to the healthcare industry to address industry trends like increased use of Electronic Health Records. Syntel’s solutions helps stream line processes with the use of IT, such as the introduction of mobile solutions to improve access to health information.

Increasing Demand of IT services in Manufacturing Sector

The demand for Syntel’s services in the Manufacturing sector is driven by trends such as the desire of manufacturing firms to penetrate emerging markets. Syntel’s solutions include Product Lifecycle Management, Supply Chain Management and operations planning.

5.2 Key Risks

Syntel cannot make any assurances that the development of future facilities will occur or be completed on time. If Syntel is unable to complete the construction of these facilities, the Company’s operation and financials will be negatively impacted.

6. Conclusion

The share price had a sharp dip in early October this year. This was largely due to the sudden issuance of special cash dividends and the lowered expectation of EPS. However, I believe this one off event would have little to no impact on the future fundamentals and revenue drivers of the company.

Target Price: $30.37

My stand is to Long Syntel. There is demand for Syntel’s services in numerous industries, which would result in consistent long term growth for the company.

If you want to learn more about how to find undervalue stocks to invest using a 96-old investing formula taught in Columbia University and used by the legendary investor, Warren Buffett, click on the picture below to join our Free Value Investing Masterclass.

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Geraint Liu
Research Analyst, Mind Kinesis Value Investing Academy

Disclaimer: Please note that all information stated in this article is just for education purpose only and should not be used as any form of recommendation or advice.

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