Mphasis (MPHASIS)

FairStock Score: 57/100 — STEADY

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

Key Financials

Strengths

• ROE of 18.69% and ROCE of 22.71% show strong capital efficiency.
• Low debt-to-equity of 0.21 and Piotroski F-Score of 8/9 indicate a financially healthy balance sheet.
• Free cash flow of ₹1,937 Cr provides a roughly 4.4% cash yield and supports the 2.48% dividend yield.
• Consistent but moderate growth: sales up 10.16%, profit up 9.13%, and 5-year revenue CAGR of 7.92%.
• Altman Z-Score of 4.11 suggests low bankruptcy risk.

Concerns

• Valuation is rich: P/E of 23.99 and P/B of 4.51 leave no margin of safety versus Graham Number of ₹1,040.53.
• PEG of 3.28 suggests the market is paying a high multiple for modest single-digit growth.
• Negative EV/EBITDA of -1.72 conflicts with positive profits and cash flows, raising a data or accounting red flag.
• DCF intrinsic value of ₹1,811.67 is below the current price of ₹2,277.

AI Analysis

Let me look at Mphasis the way I look at any business. It sells software services, a good industry but one without natural pricing power unless a firm has genuine client lock-in. The numbers show a steady, financially sound operation: return on equity of 18.69%, return on capital employed of 22.71%, and a debt-to-equity ratio of just 0.21. It generates real cash — free cash flow of ₹1,937 crore against a market cap of ₹43,787 crore is roughly a 4.4% cash yield. The Piotroski score of 8/9 and Altman Z of 4.11 tell me the balance sheet is not a concern. Promoters hold 30.59%, which is acceptable. The dividend yield of 2.48% offers some shareholder return. But being a good business is not the same as being a good investment. Sales grew 10.16% and profit grew 9.13%, while five-year revenue CAGR is only 7.92%. That is a steady compounder, not a fast grower. At ₹2,277, I am paying 23.99 times earnings and 4.51 times book. The Graham number, a conservative estimate of fair value, is ₹1,040 — the market price has no margin of safety; it trades 120% above that number. The DCF value of ₹1,811.67 is also below today's price. Even with high quality, Mr. Market is asking for optimism. The negative EV/EBITDA in the data is a yellow flag—it conflicts with the healthy cash flows and needs explanation before I trust any valuation. Mphasis is a fine stalwart franchise, but it is not a bargain. I would wait for a lower price, perhaps closer to book or DCF value, before committing new capital.

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