Tera Software (TERASOFT)

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

Key Financials

Strengths

• Revenue and profit growth are explosive: sales +147.55% and profit +199.06%.
• Healthy balance sheet: debt/equity only 0.22 and ROE 17.52%.
• Piotroski F-score 7/9 suggests improving fundamental quality.
• Promoter holding of 47.53% aligns owners with minority investors.
• PEG of 0.13 shows apparent growth-at-a-reasonable-price if the growth rate persists.

Concerns

• P/E 21.81 and P/B 3.72 leave little margin of safety; the stock is down about 42% from its 52-week high.
• Latest quarterly net profit of ₹6 Cr is modest, so growth may be from a low base or one-off.
• ROCE of 11.28% is much lower than ROE of 17.52%, making operating returns less impressive.
• Dividend yield of 0.28% is negligible; total return depends entirely on price appreciation.

AI Analysis

At ₹349.55, Tera Software is not the kind of business Graham would flag as a statistical bargain. The P/E of 21.81 and P/B of 3.72 make the market pay up for future growth, not just for assets on the balance sheet. The good part is that the recent growth has been exceptional: sales up 147.55% and profits up 199.06%. A 17.52% ROE with a debt/equity ratio of only 0.22 shows management has used limited borrowings. The Piotroski score of 7/9 gives me confidence that the financials are improving rather than window-dressed. Promoter holding of 47.53% keeps their interests aligned with retail shareholders. But I must resist the temptation to extrapolate. In IT enabled services, a one-time project spurt or favourable base can produce such jumps, and the latest quarterly profit of ₹6 Cr is still small in absolute terms. The stock has already fallen from ₹598 to ₹349.55, which tells me volatility is real. With ROCE at 11.28%, the underlying operating return is modest; the high ROE owes something to leverage and unusual profit growth. At ₹448 Cr market cap and a dividend yield of 0.28%, this is a total shareholder return story dependent on growth continuing. Graham would want a margin of safety; 21.81 times earnings is not that margin. I would hold it in the "fast grower" bucket and watch whether the quarterly sales and profit trajectory continues. The PEG of 0.13 is only meaningful if the 199% profit growth persists, which is rare for any industry.

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