Analysis of the TCS (Tata Consultancy Services Ltd) share

TCS is an IT servicing and consulting firm that provides business solutions to the businesses related to banking, finance, insurance, retail, consumer business, communication, media, technology, energy, healthcare, manufacturing, travel and many more. A few key clients of this leading IT company are General Electric, Cisco, Vodafone, British Telecom, SBI, Experian, Tata McGraw Hill, JP Morgan, Citibank, Walmart, Nokia, Royal Bank of Scotland, etc.

This blue-chip company has shown consistent price performance since its listing. If you look at the monthly chart, it shows that the stock has made an ascending price pattern which shows that the stock has given outstanding returns in the long term. If we look at the TCS share’s price CAGR, it shows that the stock has grown at the rate of 20.64% annually on compounded basis, since its listing. If we look at five-years’ stock-price-CAGR, it is 25.65% which means it has given a compounded return of 25.65% each year, in last five financial years. However, stock has given negative return in the financial year ‘2022-2023’ which means there is a lot of scope of growth in this stock, for at least a couple of FYs.

Picture 6.1

If we look at the recently posted TCS results, we find that company has exhibited a QOQ revenue growth of 5.27% and profit growth of 3.99%. The revenue and profit growth against Q3FY22 are 19.11% and 10.98% respectively. If we look at the five-quarters’ profit CAGR of TCS stock, it comes out to be 2.11% against 1.63% five-quarters’ profit CAGR as after Q2FY23 results. It means company has shown good growth in the profit, on all the fronts.

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Let’s now check the important ratios of the stock, the EPS of the company is 103.62 against 83.05, 86.19 and 86.71 in previous three financial years. The ROE is also on the higher side at 42.99 against 35.18, 38.44, and 37.52 in previous years. The ratio of the assets and liabilities is also good, albeit the PE ratio is 30.75 which is higher than the sector’s PE of 26.18, and might be the reason of stocks underperformance this year.

Let’s have a look at the technical setup of the TCS share.

The technical reading of the TCS chart shows that the 50 days’ moving average crosses above the 200 days’ moving average making a bullish golden cross. It has also formed a bullish cross (09 DEMA above 21 DEMA) today. On the weekly chart, it is trading above 200, 21, 09, and 50 DEMAs which, too, gives a bullish signal. The stock has a support near 3200 (as shown in the Picture 6.2) levels and currently trading near 3340.

Picture 6.2

After looking at the fundamental and technical analysis, I presume that this stock will give a good up move from here based on the Golden cross set-up. It is also evident that stock has underperformed this year delivering a negative return of 10.89% against a compound annual return of 20.64% for last seventeen years, which means there is a room for an up-move this year.  Therefore, it seems to be a good stock to buy for a return of 20 to 30% in a year or so. However, it is very important to place a stop loss below 3200 which was the latest low. Also, the entry must be taken above today’s high of 3350.

Note: I have just shared what I studied. I am not sure if I’ll trade this stock or not. Also, the Data, used for analysis, has been taken from different sources on internet and I am not a SEBI authorized analyst, therefore verify the data and seek experts’ opinion before taking any trade.