Comparison of top 3 IT companies
I have done a comparison of top 3 IT companies in India – TCS, Infosys and HCL Tech from an investment perspective. The table below compares the key performance and valuation parameters.
Based on the above, it seems that TCS is expensive compared to its past valuations. Also, it is probably the best in terms of efficiency and performance though the growth rates are lesser than HCL Tech and Infosys. In case of a correction, TCS will be the best buy.
Given that at current levels, the divergence of Infosys and HCL tech from its median PE is not very high. Hence they are not as expensive as TCS.
Also, growth rates in the recent quarter for both of them are good. This can definitely lead to a reduction in the PE divergence between TCS and the other 2. Infosys and HCL Tech need to improve their return on capital employed compared to TCS.
So if you are a long term investor – it would be best to wait for a correction in TCS. A PE level of 28 may be good for a long term investment.
Also, if you would like to add a little more growth companies with significant chance of an out performance, HCL tech will be nice to have in the portfolio. Infosys is in between the 2 and can be used as a median performer.
