Coforge (COFORGE)

FairStock Score: 70/100 — STEADY

Score breakdown: P/E: 0/3 · ROCE: 1/2 · Growth: 2/2 · Dividend: 0/1

Key Financials

Strengths

• Strong growth: sales up 39.36% and profit up 56.31% with 5-year revenue CAGR of 20.91%
• Solid profitability: ROE of 18.98% and ROCE of 20.34%
• Low leverage: debt-to-equity of 0.14 and Piotroski F-Score of 8/9
• Financially safe: Altman Z-Score of 4.39 indicates low bankruptcy risk

Concerns

• Valuation is rich: P/E of 31.67, P/B of 6.42, and EV/EBITDA of 18.33
• Negative free cash flow of ₹-1,201 crore despite reported net profits
• No promoter holding (0.00%), so no owner alignment
• No margin of safety: Graham Number of ₹407.30 versus market price of ₹1,220.45

AI Analysis

Looking at Coforge, I see a business with impressive growth but a price that troubles me. The company has compounded revenue at nearly 21% over five years, and last year sales grew over 39% with profits jumping 56%. That type of momentum is not easy to find. Return on equity is nearly 19%, and return on capital employed above 20%, suggesting management is deploying shareholder money well. The balance sheet is sound—debt-to-equity is just 0.14, and the Piotroski score of 8 out of 9 indicates strong financial health. The Altman Z-score of 4.39 also tells me bankruptcy risk is low. But as Graham taught us, even the best business can be a poor investment if you overpay. At ₹1,220, the stock trades at a P/E of 31.67 and price-to-book of 6.42 versus a book value of just ₹190. Graham's number, a rough fair-value anchor, is ₹407—implying the market is paying 3 times that. With negative free cash flow of ₹1,201 crore despite reported profits, I worry about earnings quality and working capital demands. Also, promoter holding is zero, so there is no owner-operator with skin in the game. The company is growing fast and is profitable, but there is no margin of safety. A 1.28% dividend yield doesn't compensate for the valuation risk. This looks like a fine IT services company, but at this price, the risk-reward is not in our favor. I would wait for a much lower price or clear evidence of sustained cash generation before considering an investment.

Data from BSE/NSE filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer