Newgen Software (NEWGEN)
Slow GrowerFairStock Score: 65/100 — STEADY
Score breakdown: P/E: 1/3 · ROCE: 2/2 · Growth: 0/2 · Dividend: 0/1
Key Financials
| Current Price | ₹535.15 |
| Market Cap | ₹7,554.15 Cr |
| P/E Ratio | 24.1 |
| ROCE | 27.97% |
| ROE | 19.96% |
| Dividend Yield | 1.12% |
| Profit Growth | 27.8% |
| Debt/Equity | 0.02 |
| Sales Growth | 11.2% |
| Free Cash Flow | ₹47.29 Cr |
| Promoter Holding | 53.52% |
| 52-Week Range | ₹401.05 — ₹1,041.95 |
| Sector | IT - Software |
| Book Value | ₹125.91 |
Strengths
- High return ratios: ROE 19.96% and ROCE 27.97% with negligible leverage (D/E 0.04).
- Strong balance sheet health indicated by Piotroski 7/9 and Altman Z-Score 4.24.
- Promoter holding of 53.52% aligns long-term interests.
- Latest quarter shows healthy net margin of 15.75% (₹63 Cr profit on ₹400 Cr sales).
Concerns
- Profit growth is negative at -3.06%, while sales growth is only 8.33%.
- Valuation is far above conservative estimates: price ₹477.70 vs Graham Number ₹227.35 and DCF ₹24.79.
- PEG ratio of 79.99 signals extremely expensive valuation relative to weak growth.
- Low cash generation: FCF ₹47 Cr against market cap ₹7,240 Cr, with dividend yield just 0.98%; negative EV/EBITDA needs scrutiny.
AI Analysis
At ₹477.70, Newgen is not a stock I can call a bargain. The business quality is real: ROE of 19.96%, ROCE of 27.97%, and debt/equity of only 0.04. Those numbers, with promoters owning 53.52%, point to disciplined capital allocation and a narrow moat. The Piotroski score of 7/9 and Altman Z-Score of 4.24 confirm a sound balance sheet. The latest quarter adds ₹400 Cr of sales and ₹63 Cr of net profit, a healthy 15.75% margin. But my favourite metric, margin of safety, is absent. The Graham Number is ₹227.35, while the market price is ₹477.70; I am paying more than twice the conservative value. The DCF value of ₹24.79 is far lower, and although DCFs depend on assumptions, the gap is too wide to dismiss. Sales growth is only 8.33%, and profits actually fell 3.06%. A PEG ratio near 80 is meaningless; it tells me either earnings growth must explode or the market is paying a fantasy premium. Free cash flow of ₹47 Cr against a ₹7,240 Cr market cap is less than a 0.7% cash yield, and the dividend yield is only 0.98%. The negative EV/EBITDA also needs an explanation before I would trust the operating earnings power. Benjamin Graham reminded us that price is what you pay, value is what you get. Here, I would be paying a high multiple for a 'steady' business with stalled growth. I would rather wait for a better price or evidence of accelerating earnings. For now, Newgen stays on my watchlist, not in my portfolio.
Data from BSE/NSE filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer