Financial And Technical Analysis Of Wipro Technologies Finance Essay
Wipro Technologies, a division of Wipro Limited (NYSE:WIT - News) is the first PCMM Level 5 and SEI CMM Level 5 certified global IT services organization. Wipro Technologies was recently assessed at Level 5 for CMMI V 1.2 across offshore and onsite development centers. Wipro is one of the largest product engineering and support service providers worldwide. Wipro provides comprehensive research and development services, IT solutions and services, including systems integration, information systems outsourcing, package implementation, software application management, and datacenter managed services to corporations globally.
In the Indian market, Wipro is a leader in providing IT solutions and services for the corporate segment in India, offering system integration, network integration, software solutions and IT services.
Wipro also has a profitable presence in niche market segments of consumer products and lighting. In the Asia-Pacific and Middle East markets, Wipro provides IT solutions and services for global corporations. Wipro's ADS' are listed on the New York Stock Exchange, and its equity shares are listed in India on the Stock Exchange - Mumbai, and the National Stock Exchange.
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A method of evaluating securities by analyzing statistics generated by market activity, such as past prices and volume. Technical analysts do not attempt to measure a security's intrinsic value, but instead use charts and other tools to identify patterns that can suggest future activity.
This analysis shows that in may 2009 the price of shares was around 267 and in July 2009 the prices gone up to 1700 and after that the prices gone down to less than 500 and in march in march 2010 the prices was around 700.
Fundamental analysis is the process of looking at a business at the basic or fundamental financial level. This type of analysis examines key ratios of a business to determine its financial health and gives you an idea of the value its stock.
Many investors use fundamental analysis alone or in combination with other tools to evaluate stocks for investment purposes. The goal is to determine the current worth and, more importantly, how the market values the stock.
This article focuses on the key tools of fundamental analysis and what they tell you. Even if you don't plan to do in-depth fundamental analysis yourself, it will help you follow stocks more closely if you understand the key ratios and terms.
Fundamental Analysis Tools
These are the most popular tools of fundamental analysis. They focus on earnings, growth, and value in the market.
Earnings per Share - EPS
Price to Earnings Ratio - P/E
Projected Earnings Growth - PEG
Price to Sales - P/S
Price to Book - P/B
Dividend Payout Ratio
Return on Equity
Mar ' 09
Mar ' 08
Mar ' 07
Mar ' 06
Mar ' 05
Per share ratios
Adjusted EPS (Rs)
Adjusted cash EPS (Rs)
Reported EPS (Rs)
Reported cash EPS (Rs)
Dividend per share
Operating profit per share (Rs)
Book value (excl rev res) per share (Rs)
Book value (incl rev res) per share (Rs.)
Net operating income per share (Rs)
Free reserves per share (Rs)
Operating margin (%)
Gross profit margin (%)
Net profit margin (%)
Adjusted cash margin (%)
Adjusted return on net worth (%)
Reported return on net worth (%)
Return on long term funds (%)
Long term debt / Equity
Owners fund as % of total source
Fixed assets turnover ratio
Current ratio (inc. st loans)
Inventory turnover ratio
Dividend payout ratio (net profit)
Dividend payout ratio (cash profit)
Earning retention ratio
Cash earnings ratio
Adjusted cash flow time total debt
Financial charges coverage ratio
Fin. charges cov.ratio (post tax)
Material cost component (% earnings)
Selling cost Component
Exports as percent of total sales
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Import comp. in raw mat. consumed
Long term assets / total Assets
Bonus component in equity capital (%)
Earnings per Share - EPS : In 2007 the EPS of Wipro was 19.48 but in 2008 it increases to 20.96 and in next year it decreases to 20.30. May be in the coming year it'll decrease.
Price to Earnings Ratio - P/E : In 2007 this ratio was 68.86 and in 2008 it increases to 70.87 and in 2009 it increases to 80.46. It regularly increasing and it is a good sign to invest in that company.
Price to Book - P/B : In 2007 this ratio was 63.86 and in 2008 it increases to 79.05 and in 2009 it increases to 85.42.
Dividend Payout Ratio: In 2007 this ratio was 35.20 and in 2008 it decreases to 33.47 and in 2009 it again decreases to 23.05. The company is Skipping the dividend to the shareholders and it may be investing in the new projects etc.
Dividend Yield: In 2007 this ratio was 6.00 and in 2008 it remains the same to 6.00 and in 2009 it decreases to 4.00.
Return on Equity: In 2007 this ratio was 30.50 and in 2008 it increases to 26.51 and in 2009 it increases to 23.76.
The future prospects
Most experts feel Wipro will record higher revenue growth than Infosys in the coming year. After a gap of two years, telecom companies are increasing their IT allocation, as is evident from the fourth-quarter results of companies like Wipro and Hughes Software, which get a sizeable chunk of business from telecom original equipment manufacturers (OEMs).
Some analysts says, it should keep Wipro ahead of Infosys in 2009-10, but in the long term, most analysts expect revenue growth of both companies to be at par. Some, in fact, even feel that Infosys will do better than Wipro.
Company's margins are not expected to improve from current levels. For many reasons. One, billing rates are not expected to rise, and growth will have to be led by volumes. IT companies are in serious hiring mode, and are likely to be compelled to hike salaries, which will increase costs. Three, the rupee is expected to keep appreciating against the dollar. This will drag down profits of both companies, which earn nearly 80 per cent of their revenues in dollars.
It appears that in the present business scenario, the only ways for Indian IT companies to boost profits and margins is to cut costs or improve efficiencies. On the cost front, a company could do more work out of India, where staff costs are lower. On the efficiency front, a company can increase employee utilisation rate.
In any business where people are a key resource, employee attrition is a key concern. Wipro's annual attrition rate 17 per cent. Analysts point out that Wipro's numbers include the BPO business, which typically sees more employee churn than IT services.
Major factors affecting the valuation of the stock for the given period
Demand and Supply - This fundamental rule of economics holds good for the equity market as well. The price is directly affected by the trend of stock market trading. When more people are buying a certain stock, the price of that stock increases and when more people are selling the stock, the price of that particular stock falls.
News - News is undoubtedly a huge factor when it comes to stock price. Positive news about a company can increase buying interest in the market while a negative press release can ruin the prospect of a stock. It is the overall performance of the company that matters more than news. It is always wise to take a wait and watch policy in a volatile market or when there is mixed reaction about a particular stock. In past most of the news comes about the good reputation and good profits etc.
Market Cap - It is the market capitalization of the company, rather than the stock, that is more important when it comes to determining the worth of the company. We need to multiply the stock price with the total number of outstanding stocks in the market to get the market cap of a company and that is the worth of the company. Wipro is the 2nd most reputated company in IT sector in India.
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Earnings Per Share - Earning per share is the profit that the company made per share on the last quarter. It is mandatory for every public company to publish the quarterly report that states the earning per share of the company. This is perhaps the most important factor for deciding the health of any company and they influence the buying tendency in the market resulting in the increase in the price of that particular stock. So, if we want to make a profitable investment, we need to keep watch on the quarterly reports that the companies and scrutinize the possibilities before buying stocks of particular stock. EPS of Wipro is increasing regularly from 2007.
Price/Earnings Ratio - Price/Earnings ratio or the P/E ratio gives fair idea of how a company's share price compares to its earnings. If the price of the share is too much lower than the earning of the company, the stock is undervalued and it has the potential to rise in the near future. On the other hand, if the price is way too much higher than the actual earning of the company and then the stock is said to overvalued and the price can fall at any point.
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