Firstsour.Solu. (FSL)

FairStock Score: 63/100 — STEADY

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

Key Financials

Strengths

• Promoter holding of 53.66% and Piotroski F-Score of 8/9 indicate ownership alignment and healthy financial discipline.
• ROE and ROCE both at 15.37% with Altman Z-Score of 3.48 suggest solid profitability and low bankruptcy risk.
• Latest sales growth of 21.97% and 5-year revenue CAGR of 9.46% demonstrate topline momentum.
• Dividend yield of 2.58% provides some shareholder return while waiting.

Concerns

• Free cash flow is negative at ₹-43 Cr despite a net profit of ₹120 Cr, raising questions about earnings quality and cash conversion.
• Valuation is rich: P/E of 21.44, PEG of 3.92, and EV/EBITDA of 136.73, while price is well above the Graham Number of ₹108.15, leaving no margin of safety.
• Profit growth of 11.03% trails sales growth of 21.97%, indicating margin compression.
• Stock has fallen from its 52-week high of ₹381.40 to ₹225, reflecting negative price momentum and possible value-trap risks.

AI Analysis

As a value investor, I start with business quality. Firstsource operates in the competitive BPO/KPO space, where a moat must come from scale, client relationships, and execution. The numbers show a capable operator: promoter holding is 53.66%, ROE and ROCE are both 15.37%, and the Piotroski F-Score of 8/9 signals healthy financial discipline. The Altman Z-score of 3.48 also tells me bankruptcy risk is low, and debt/equity of 0.54 is manageable. Revenue growth is respectable—21.97% recent and 9.46% five-year CAGR—so the business is not stagnant. But Graham taught me that profit is an opinion, cash is a fact. Despite a net profit of ₹120 Cr in the latest quarter, free cash flow is ₹-43 Cr. Profit growth of 11.03% also lags sales growth of 21.97%, suggesting margin pressure. That weakens my confidence in the quality of earnings and in the durability of any moat. Then comes valuation. At ₹225, P/E is 21.44 and P/B is 3.88. The Graham Number is ₹108.15, giving me no margin of safety; the indicated margin of safety is deeply negative. PEG of 3.92 and EV/EBITDA of 136.73 are far beyond what I would pay for this growth rate. The share is down from its 52-week high of ₹381.40, but a declining price is not a reason to buy. I need a clear gap between value and price. The 2.58% dividend yield and 53.66% promoter holding are positives, but they do not compensate for an expensive price and weak cash conversion. This is a steady, decent business, not a bargain. I would keep it on my watchlist and wait for a better entry point.

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