eClerx Services (ECLERX)

FairStock Score: 81/100 — HIGH CONVICTION

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

Key Financials

Strengths

• High return on equity of 29.01% and ROCE of 27.97% with low leverage of 0.15 D/E
• Strong growth: sales up 23.87% and profit up 29.19%, with a 5-year revenue CAGR of 16.57%
• Financial health indicators are robust: Piotroski F-Score 8/9 and Altman Z-Score 5.89
• Free cash flow of ₹798 Cr supports earnings quality and promoter holding is high at 54.53%

Concerns

• At ₹1,485.35, the stock trades above the Graham Number of ₹1,219.35, leaving a negative margin of safety
• P/E of 22.60 and P/B of 3.07 are not cheap for a BPO/KPO business
• Dividend yield of 0.03% means investors depend entirely on future growth for returns
• The stock is near its 52-week low of ₹1,321, down from ₹2,497.50, indicating possible business or sector concerns

AI Analysis

eClerx is the kind of business I can admire: a high-return BPO/KPO operator earning 29.01% on equity and 27.97% on capital, with a Piotroski score of 8 out of 9 and an Altman Z-score of 5.89. The balance sheet is clean, with debt-to-equity of just 0.15, and the negative EV/EBITDA of -19.93 suggests there is substantial net cash on the books. Promoters own 54.53%, so their interests are aligned with mine. Sales grew 23.87% and profits grew 29.19%; even over five years, revenue compounded at 16.57%. The latest quarter shows ₹1,070 Cr in sales and ₹192 Cr in net profit, and free cash flow of ₹798 Cr supports the quality of reported earnings. Yet I am a buyer only at the right price. At ₹1,485.35, the P/E is 22.60 and P/B is 3.07, while the Graham Number is ₹1,219.35. That gives no margin of safety; the quoted margin of safety is deeply negative. The dividend yield of 0.03% is negligible, so returns must come from growth. The DCF figure of ₹8,958.17 looks attractive, but I never let one model make me bold; small changes in assumptions can destroy such projections. The stock has fallen from ₹2,497.50 to near its 52-week low. Maybe the market is worried about something real. I would need to understand why before acting. Quality is here; the margin of safety is not. I would wait for a better price or proof that 29% profit growth is durable.

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