Mid-size technology company Mastek has delivered solid returns to long-term investors. While it might not seem as exciting as its peers in the IT space like TCS, Infosys, HCL Tech, Tech Mahindra, this stock has stood out in the eyes of investors with a long-term investment horizon.
Mastek has given a 1,355% return over a five-year period, as against 110% rise in benchmark BSE Sensex and 90% in BSE midcap index. In comparison, index heavyweights Infosys gained 282% in the last five years, followed by Tata Consultancy Services (245%), Wipro (242%), Tech Mahindra (203%), and HCL Technologies (181%).
Mastek’s share price has surged nearly 15 times during this period, with the stock price rising from ₹192 on February 3, 2017, to ₹2,800 intraday today. An investment of ₹1 lakh in this multibagger stock on February 3, 2017, would have become around ₹14.6 lakh at present.
The multinational software services provider, with customers across 41 countries worldwide including U.K., U.S., Europe, has generated 132% returns over the past one year. The spurt in share price can be attributed to steady long-term growth, robust debt protection metrics, and a strong liquidity profile. The IT firm has declared positive results for the last eight consecutive quarters.
However, the stock seemed to have lost momentum in the last six months, with the price falling by one-fourth from its peak value. It has gained merely 5% in the 6 month period, while it gave a negative return of 9% over the last one month.
On Wednesday, Mastek's share price opened higher at ₹2,750 against the previous close price of ₹2,713.75 and gained as much as 3.18% to hit an intraday high of ₹2,800. It has risen nearly 7% in the last four sessions.
The midcap stock, with a market capitalisation of ₹8,273.6 crore, trades 24% below its 52-week high of ₹3,666 touched on October 19, 2021. The share hit its 52-week low of ₹1,065.90 on February 10, 2021.
Last week, the domestic rating agency reaffirmed the rating of ‘[ICRA]AA-‘ for long-term fund-based Mastek with a stable outlook, citing steady revenue growth, low reliance on debt, and a strong liquidity profile.
“The stable outlook on the rating reflects ICRA’s opinion that Mastek will continue to benefit from its established business profile, healthy order book position, and favourable demand outlook of the industry,” the agency said in a report dated January 27, 2022.
The agency, however, cautioned that the ratings remain constrained by Mastek’s high revenue dependence on the U.K.’s public sector, exposing it to the risk of any changes in the U.K. government’s policy on IT spending. Mastek has a major presence in the U.K., which contributed to 67% of the company’s overall revenues in FY21.
In the recently concluded October-December quarter of 2021, Mastek reported 18.7% growth in consolidated net profit at ₹83.5 crore, compared to ₹70.3 crore in Q3FY21. The revenue from operations grew 24.6% to ₹551.90 crore from ₹442.9 crore in the year-ago period.