Analysts at brokerage firm Emkay believe that the risk-reward ratio offered by shares of Persistent Systems Ltd. at its current market price is "unfavourable" and that they would await a better entry point to turn constructive on the stock.
Emkay has maintained its "reduce" rating on the stock with a price target of ₹7,850. The price target implies a potential downside of 5% from Monday's closing levels.
Persistent Systems shares have rallied 74% over the last 12 months and has gained 5x over a three-year period.
Emkay believes that the company is well poised to sustain industry-leading growth momentum led by strong execution, proactive deal pursuits, ability to identify new growth avenues like the Private Equity business, presence in high growth areas and limited exposure to the legacy business.
The company also aims to maintain its growth momentum and attain the $2 billion revenue run-rate by financial year 2027, implying a Compounded Annual Growth Rate (CAGR) of 18% over financial year 2023 - 2027.
At 45 times financial year 2025 Earnings per Share (EPS) and 36 times financial year 2026 EPS, Emkay has termed Persistent's valuations as expensive.
The brokerage believes that the current valuation demands "flawless execution" and sustained industry growth tailwinds, leaving little room for error.
Shares of Persistent Systems ended lower on Monday and have corrected nearly 8% from its peak of ₹8,900.
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