Transformational Deals And AI Focus Will Foster Progress

Key Takeaways

• WNS's strategic acquisitions and AI focus are set to enhance service offerings, driving revenue growth and margin stability.
  
• Balanced capital allocation using tuck-in acquisitions and share repurchases aims to boost EPS through reduced share count and high-value investments.
  
• WNS faces challenges from client losses, currency fluctuations, high attrition, and macro volatility impacting revenue growth and operating margins.

Catalysts

A business process management (BPM) company, provides data, voice, analytical, and business transformation services worldwide.

• WNS has entered fiscal 2026 with solid business momentum, a healthy pipeline, and has closed two large transformational deals in banking and financial services as well as the travel vertical, expected to contribute to revenue growth in the first half of fiscal 2026.
  
• The acquisition of Kipi.ai enhances WNS' positioning in the data management space, with significant potential for value creation through combining data and AI expertise, likely impacting revenue and margins positively through higher-value services.
  
• Mentioned expansion in AI and hiring of significant leadership in AI and digital strategy suggest a focused investment in growth areas that can lead to improved productivity and higher-value service offerings, enhancing both revenue and net margins.
  
• Despite past revenue headwinds, WNS's recurring business model and strategic focus on AI and data suggest increased operational leverage and margin stability, projected to drive an 11% increase in adjusted EPS, excluding onetime fiscal 2025 benefits.
  
• Strategic tuck-in acquisitions and share repurchase activities have been highlighted as part of their balanced capital allocation strategy, potentially leading to improved EPS due to reduced share count and continued investment in high-value areas.

WNS (Holdings) Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming WNS (Holdings)'s revenue will grow by 8.2% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 12.9% today to 12.4% in 3 years time.
• Analysts expect earnings to reach $206.9 million (and earnings per share of $4.73) by about April 2028, up from $170.1 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 16.1x on those 2028 earnings, up from 15.4x today. This future PE is lower than the current PE for the US Professional Services industry at 20.7x.
• Analysts expect the number of shares outstanding to decline by 4.57% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.31%, as per the Simply Wall St company report.

WNS (Holdings) Future Earnings Per Share Growth

Risks

• The company experienced a decline in full-year net revenue by 1.5% on a reported basis, faced customer-specific revenue headwinds, including a large healthcare client loss, which reduced operating leverage and impacted adjusted operating margin. [Revenue, Net Margins]
  
• WNS is affected by unfavorable currency movements, which have adversely impacted net revenue and operating margins, demonstrating a risk associated with exchange rate fluctuations. [Revenue, Net Margins]
  
• The company anticipates continued year-over-year headwinds related to fiscal 2025 ramp-downs with a healthcare client and online travel volumes, potentially limiting near-term revenue growth. [Revenue]
  
• There is a noted risk in volatile macro environments affecting discretionary project spending, contributing only 10% to revenue, which could impact the overall financial performance if client behavior changes. [Revenue]
  
• An increased attrition rate, reaching 39%, could pose a risk to operational stability and efficiency, potentially leading to increased costs associated with recruitment and training, thereby impacting net margins. [Net Margins]

Valuation

• The analysts have a consensus price target of $68.875 for WNS (Holdings) based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $78.0, and the most bearish reporting a price target of just $54.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.7 billion, earnings will come to $206.9 million, and it would be trading on a PE ratio of 16.1x, assuming you use a discount rate of 9.3%.
  
• Given the current share price of $60.0, the analyst price target of $68.88 is 12.9% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.