Capgemini SE is a financially healthy and robust stock with a proven track record of outperformance. We all know Capgemini, and having this large-cap to cushion your portfolio during a volatile period in the stock market isn’t a bad idea. Today I will give a high-level overview of the stock, and why I believe it’s still attractive.
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Capgemini SE provides consulting, technology, and digital transformation services. Established in 1967, and run by CEO Paul Hermelin, the company provides employment to 205.57k people and with the market cap of €14b, it falls under the large-cap group. Generally, large-cap stocks are well-resourced and well-established meaning that a bear market will cause it to rejig some short-term capital allocations, but stock market volatility is hardly detrimental to its financial health and business operations. Therefore large-cap stocks are a safe bet to buy more of when the wider market is going down and down.
Currently Capgemini has €4.2b on its balance sheet, which requires regular interest payments. This requires the business to have enough cash to meet these upcoming interest expenses. With an interest coverage ratio of 63.1x, Capgemini produces sufficient earnings (EBIT) to cover its interest payments. Anything above 3x is considered safe practice. Furthermore, its operating cash flows amply covers its total debt by 31%, above the safe minimum of 20%. Its cash and short-term investment is also sufficient to cover other upcoming liabilities, which means CAP is financially robust in the face of a volatile market.
CAP’s profit growth over the previous five years has been positive, with an average annual rate of 15%, outpacing the market growth rate of 14%. Capgemini’s strong performance over time is a demonstration of its ability to grow through cycles, raising my confidence in the company as a long-term investment.
Next Steps:
Based on these three factors, CAP makes for a strong long-term investment in the face of a fickle stock market. If you’re a risk averse investor, lining your portfolio with proven companies you’re willing to buy more and more of as the price falls, is a good strategy to build your wealth over the long run. This is the beginning of your research, but before you decide to buy CAP, I highly urge you to understand more about the company, in particular, in these following areas:- Future Outlook: What are well-informed industry analysts predicting for CAP’s future growth? Take a look at our free research report of analyst consensus for CAP’s outlook.
- Valuation: What is CAP worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether CAP is currently mispriced by the market.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.