Unlike BAH, Genpact (G) looks definitively cheap on a relative valuation basis. Spun out of General Electric (GE) back in 2007, the company handles everything from accounting services to supply chains for industries as varied as banking, aerospace and logistics.
With the sluggish global economy making corporate revenue growth nearly impossible to come by, Genpact’s 400-plus clients need to squeeze every basis point of savings out of their cost structures.
That has helped propel shares to a 25% gain in 2013 vs. a 16% increase for the broader market. And yet, by some measures, the stock still looks like a bargain.
The forward P/E of 16.5 offers a 12% discount to its own five-year average, according to data from Thomson Reuters Stock Reports. Paying less than 17 times forward earnings seems more than reasonable given Wall Street’s forecast that Genpact will grow earnings by an average of 15% a year over the next five years. Remember: The S&P 500 currently fetches 15 times forward earnings for a growth rate of just 9.4% over the same period.