MoneyWorks4Me

Check Before You Invest : ESDS Software Solution Ltd

BSE: 544898 NSE: ESDS ISIN: INE0DRI01029
  |   Sector:  IT & ITES   |   Industry:  IT - Software

Snapshot

Q.1 Which industry/sub-sector does ESDS Software Solution Ltd belong to?
ESDS Software Solution Ltd belongs to the IT & ITES sector, operating specifically within the IT - Software segment.
Q.2 Is ESDS Software Solution Ltd a good quality company?
ESDS Software Solution Ltd is a average quality company, based on a somewhat consistent multi-year financial track record.

This assessment is based on company’s performance on Revenue growth, ROCE, Equity and Assets, key margin ratios, cash conversion cycle, and debt to cash flow from operations and how it compares with its long term averages.

Q.3 Is ESDS Software Solution Ltd undervalued or overvalued?
ESDS Software Solution Ltd appears Overvalued, as its key valuation ratios are higher than their past averages.

Based on the industry it operates in, the relevant valuation ratios include one of the following, P/E, P/BV, P/Sales, EV/EBITDA or a combination of two or more.

Valuation Ratios Current 5-year
Historic Median
Price to Earnings 764.19 -
Price to Book - -
Price to Sales 44.77 -
EV to EBITDA 123.8 -
Q.4 Is ESDS Software Solution Ltd a good buy now?
ESDS Software Solution Ltd is not a good buy now, based on weak price trend analysis suggesting prices may fall. However, you need to check its quality and valuation before making a decision

Performance Analysis

We have analysed the performance of the company on the following:

  • How has it performed on generating Profits?

    By checking its Revenue growth, Gross, Operating and Net Margins compared to its last 5-year median.

  • How efficiently has it utilized Capital?

    By checking its ROCE, ROA, ROE and its Cash Conversion Cycle.

  • How is it managing its Debt?

    By checking its Debt to Equity and Cash Flow from Operations.

A: What are the trends in revenue and profit margins?

Q.1 Revenue growth of ESDS Software Solution Ltd?
ESDS Software Solution Ltd revenue growth is 39.7% for FY-2024, which is above its 5-year CAGR of 14.85%, indicating faster growth.

Q.2 Gross Profit margin of ESDS Software Solution Ltd?
ESDS Software Solution Ltd Gross profit margin which is the profit after deduction of direct costs, is 26.8% for FY-2024, which is in line with its 5-year median of 26.8%, indicating stable margins.

Q.3 Operating Profit Margin of ESDS Software Solution Ltd?
ESDS Software Solution Ltd Operating Profit Margin which is the profit after deduction of all operating costs, is 34.52% for FY-2024, which is in line with its 5-year median of 34.52% indicating stable margins.

Q.4 Net Profit Margin of ESDS Software Solution Ltd?
ESDS Software Solution Ltd Net Profit Margin is 5.86% for FY-2024, is above its 5-year median of 4.02%, indicating increasing margins.
Current Level 5-year
Historic Median
Gross Profit Margin (%) 26.8 26.8
Operating Profit Margin (%) 34.52 34.52
Net Profit Margin (%) 5.86 4.02

B: Does the business utilize capital efficiently?

Q.5 Return on Asset of ESDS Software Solution Ltd?
ESDS Software Solution Ltd Return on Asset is 3.18%, which is above its 5-year historical median of 1.96%, indicating improved asset utilization efficiency.

Q.6 Return on capital employed (ROCE) of ESDS Software Solution Ltd?
ESDS Software Solution Ltd Return on capital employed is 14.38% for FY-2024, which is above its 5-year historical median of 11.05%. The current ROCE is above its estimated weighted average cost of capital (WACC) of 14%, indicating value creation.

Q.7 Return on Equity (ROE) of ESDS Software Solution Ltd?
ESDS Software Solution Ltd Return on equity is 6.95% for FY-2024, which is in line with its 5-year historical median of 6.95%, indicating the business is making similar use of its shareholders capital.

Q.8 Cash conversion cycle of ESDS Software Solution Ltd?
ESDS Software Solution Ltd Cash conversion cycle is 78 days, above its 5-year historical median of 33 days, indicating deteriorated working capital management. However, you need to compare this with its peers in the industry.
Current Level 5-year
Historic Median
Asset Turnover (x) 0.54 0.4
ROE (%) 6.95 6.95
ROCE (%) 14.38 11.05
Cash Conversion Cycle 78 days 33 days

C: How much debt does the business have and is it at a sustainable level?

Q.9 Debt to Equity ratio of ESDS Software Solution Ltd?
ESDS Software Solution Ltd Debt-to-Equity ratio is 0.47, which is above the industry average of 0.01, indicating higher debt levels in the industry.

Q.10 Debt to cash flow from operations of ESDS Software Solution Ltd?
ESDS Software Solution Ltd Debt to cash flow from operations is 1.45, which is at a moderate level.

Ownership & governance

D: Promoter shareholding and pledge status of ESDS Software Solution Ltd?

Q.1 Promoter shareholding and pledge status of ESDS Software Solution Ltd?
Promoters hold % of the ESDS Software Solution Ltd, with % of their stake pledged, indicating no pledge risk.

Peer comparison (industry-wise, mcap)

E: How does ESDS Software Solution Ltd performance compare with that of its Peers?

Q.1 Revenue growth of ESDS Software Solution Ltd vs industry peers?
ESDS Software Solution Ltd revenue CAGR is 14.85%, compared to the industry median CAGR of 3.72%, indicating faster growth and gaining its market share.
Profit Metrics
Current Level 5-year
Industry Median
Revenue Growth (%) 39.7 3.7
Gross Profit Growth (%) 153.3 14.9
Operating Profit Growth (%) 102.1 15.3
Net Profit Growth (%) 0 15.3
Operating Efficiency
Current Level 5-year
Industry Median
Asset Turnover (x) 0.54 0.47
ROE (%) 6.95 4.94
ROCE (%) 14.38 7.05
Cash Conversion Cycle (days) 77.56 37

Valuation & price assessment

Q.1 Stock return of ESDS Software Solution Ltd over the last decade?
Over the last - year(s), the stock has delivered a CAGR of N/A% based on the current price.
9Y 5Y 3Y 1Y
Share Price
CAGR
- - - -
Q.2 Valuation ratios of ESDS Software Solution Ltd vs historical?
The current P/E ratio of 764.19 is higher than its historical median of , indicating that the stock is trading above its historical average valuation.
Q.3 How do the current valuation ratios compare with 5-year historical median and industry numbers?
Valuation Ratios Current 5-year
Historic Median
5-year
Industry Median
Price to Earnings 764.19 - 47.38
Price to Book - - 2.64
Price to Sales 44.77 - 4.79
EV to EBITDA 123.8 - 16.75

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