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Tips for Investing in Happiest Minds Shares in 2022

Happiest Minds is an Indian information technology and digital transformation services company. Due to interest rate hikes in the US to control inflation by the fed, tech companies have borne the brunt of the re-rating now that overvalued high-growth tech stocks see investors getting out of their positions to better risk-adjusted assets. RBI has also raised its interest rates in India to keep inflation below 4%.

However, unlike global IT tech stocks, Indian IT Tech stocks, both mid-cap and large-cap stocks, have somewhat of a recovery. Happiest Minds is part of this group of stocks seeing recovery. It has already breached its resistance levels of Rs. 1040, and if this momentum continues, the Happiest Minds share is expected to recover to a range of Rs. 1070 to Rs.1120 in the short term.

Looking at the company’s fundamentals, the Happiest Minds share price has consistently fallen since its peak in July 2021 and is currently trading 30% below its level. However, even considering this drop in the share price, considering rising rates and the fact that high-growth midcap tech companies generally enjoy exorbitant valuations, its current P/E value of 75xand P/B value of 23x still seems a bit overvalued, considering the company has only started to be profitable in 2019. The reasons for this overvaluation can be attributed to the following:

  • It has grown its profits over the last five years at a phenomenal 112% CAGR
  • It has generated a good return on equity (ROE) for the previous three years at 38.9%
  • It has a dividend yield of 0.36%,which is healthy considering it’s a growth mid-cap tech stock
  • For the June 2022 quarter results, it has grown its revenue at 34.5% QoQ and has increased its net income at 57.7% QoQ

The management has announced that they will continue to improve and expand their digital services and product offerings to achieve their goal of 25% CAGR revenue growth for FY23, with a 10-year vision to become a billion-dollar company by 2031.

Even for its industry and market capitalisation, these growth metrics for the company are stellar. So, while the company has already seen a substantial correction in its performance, future uncertainties regarding the company and general macroeconomics seem to have been already factored into its price, and investors should keep buying on dips and lower ends of the channels that the stock trades in its short-term periods.

Disclaimer: ICICI Securities Ltd. (I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100. I-Sec is a Member of National Stock Exchange of India Ltd (Member Code :07730), BSE Ltd (Member Code :103) and Member of Multi Commodity Exchange of India Ltd. (Member Code: 56250) and having SEBI registration no. INZ000183631. I-Sec is a SEBI registered with SEBI as a Research Analyst vide registration no. INH000000990. Name of the Compliance officer (broking): Ms. Mamta Shetty, Contact number: 022-40701022, E-mail address: complianceofficer@icicisecurities.com.

Investments in securities markets are subject to market risks, read all the related documents carefully before investing. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. The non-broking products / services like Research, etc. are not exchange traded products / services and all disputes with respect to such activities would not have access to Exchange investor redressal or Arbitration mechanism.

The contents herein above are solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments or any other product. Investors should consult their financial advisers whether the product is suitable for them before taking any decision. The contents herein mentioned are solely for informational and educational purpose.

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