ExlService Holdings (EXLS): Assessing Valuation Following Strategic Fraud Detection Partnership in Australia

ExlService Holdings (EXLS) announced a partnership with Shift Technology to develop a data analytics-powered fraud detection platform for the Australian insurance sector. The joint effort could give EXLS broader industry reach and provide exposure to new market opportunities.

See our latest analysis for ExlService Holdings.

EXLS’s recent partnership, following its industry conference appearance earlier this month, has caught investor interest but has not interrupted a longer-term cooling-off in the stock. Despite the strategic update, the 1-year total shareholder return sits at -17%, continuing a slide that has pushed the share price down roughly 12% year-to-date. Those holding over five years have still seen impressive total returns of 133%, which suggests that momentum has faded, but the big-picture story remains about longer-term value rather than quick rebounds.

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With the stock trading at a notable discount to analyst targets, investors may be wondering if EXLS now represents untapped value or if the market has already accounted for its next phase of growth.

Most Popular Narrative: 25.7% Undervalued

With a narrative fair value of $52.29 and the last close at $38.84, the market is pricing EXLS below what the prevailing narrative believes it should be worth. This sets the stage for a deeper dive into the projections and assumptions underpinning this stance.

The accelerated global adoption of AI and digital transformation in regulated industries is expanding the addressable market for ExlService, driving strong double-digit pipeline and growing annuity-like revenues. This trend supports sustained revenue growth and improved earnings visibility. Increasing reliance by clients on advanced data and AI-driven solutions for operational efficiency positions ExlService to generate higher-margin services, benefiting both revenue mix and long-term margin expansion as traditional usage-based contracts transition to outcome-based commercial models.

Read the complete narrative.

Curious what's driving this valuation target? You'll find bold forecasts about not just revenue growth but profit margins and future multiples typically reserved for sector leaders. Wonder what assumptions make this fair value so much higher than today's share price? Click in to see the details behind the headline projections.

Result: Fair Value of $52.29 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, rapid advances in AI and stricter global data regulations could both undermine demand and put pressure on operating margins for ExlService moving forward.

Find out about the key risks to this ExlService Holdings narrative.

Another View: What Do Earnings Multiples Suggest?

Looking from a price-to-earnings lens, EXLS trades at 25.5 times earnings, which is slightly above both the US Professional Services industry benchmark (24x) and its fair ratio of 23.8x. This suggests the market is asking a premium relative to peers and historical valuation. Could that imply hidden risk, or is there simply more confidence in the future here? The answer might surprise investors who focus only on growth forecasts.

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own ExlService Holdings Narrative

If the prevailing view does not fit your perspective or you prefer to dig into the numbers yourself, you can easily craft your own narrative in just a few minutes. Do it your way

A good starting point is our analysis highlighting 4 key rewards investors are optimistic about regarding ExlService Holdings.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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