EPAM Systems (NYSE:EPAM) - Share price, News & Analysis

Q: What is the Fair Price of EPAM when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

EPAM ($363.58) is trading below our estimate of [[fair value]] ($560.52)

EPAM fundamental analysis
Snowflake Score
Valuation	3/6
Future Growth	6/6
Past Performance	1/6
Financial Health	6/6
Dividends	0/6

EPAM Stock Overview

EPAM Systems, Inc. provides digital platform engineering and software development services worldwide.

Rewards

Trading at 35.1% below our estimate of its fair value

Earnings are forecast to grow 44.11% per year

Analysts in good agreement that stock price will rise by 32.7%

Risk Analysis

Large one-off items impacting financial results

Profit margins (8.2%) are lower than last year (13.1%)

Significant insider selling over the past 3 months

EPAM Systems Competitors

Gartner

NYSE:IT

US$22.5b

Cognizant Technology Solutions

NasdaqGS:CTSH

US$30.6b

Globant

NYSE:GLOB

US$7.9b

Amdocs

NasdaqGS:DOX

US$9.9b

Price History & Performance

Summary of all time highs, changes and price drops for EPAM Systems
Historical stock prices
Current Share Price	US$363.58
52 Week High	US$725.40
52 Week Low	US$168.59
Beta	1.66
1 Month Change	-11.78%
3 Month Change	17.04%
1 Year Change	-35.54%
3 Year Change	91.33%
5 Year Change	304.97%
Change since IPO	2,497.00%

Recent News & Updates

Oct 03

EPAM Systems (NYSE:EPAM) Is Very Good At Capital Allocation

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Typically, we'll...

Sep 19

Is EPAM Systems (NYSE:EPAM) Using Too Much Debt?

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility...

Sep 04

Calculating The Fair Value Of EPAM Systems, Inc. (NYSE:EPAM)

In this article we are going to estimate the intrinsic value of EPAM Systems, Inc. ( NYSE:EPAM ) by taking the expected...

Shareholder Returns

	EPAM	US IT	US Market
7D	2.3%	1.2%	1.0%
1Y	-35.5%	-35.9%	-20.0%

Return vs Industry: EPAM exceeded the US IT industry which returned -39.1% over the past year.

Return vs Market: EPAM underperformed the US Market which returned -23.2% over the past year.

Price Volatility

Is EPAM's price volatile compared to industry and market?
EPAM volatility
EPAM Average Weekly Movement	6.8%
IT Industry Average Movement	8.0%
Market Average Movement	6.8%
10% most volatile stocks in US Market	15.5%
10% least volatile stocks in US Market	2.8%

Stable Share Price: EPAM is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 7% a week.

Volatility Over Time: EPAM's weekly volatility has decreased from 12% to 7% over the past year.

About the Company

Founded	Employees	CEO	Website
1993	58,824	Arkadiy Dobkin	https://www.epam.com

EPAM Systems, Inc. provides digital platform engineering and software development services worldwide. The company offers engineering services, including requirements analysis and platform selection, customization, cross-platform migration, implementation, and integration; infrastructure management services, such as software development, testing, and maintenance with private, public, and mobile infrastructures for application, database, network, server, storage, and systems operations management, as well as monitoring, incident notification, and resolution services; and maintenance and support services. It also provides operation solutions comprising integrated engineering practices and smart automation; and optimization solutions that include software application testing, test management, automation, and consulting services to enable customers enhance their existing software testing and quality assurance practices, as well as other testing services that identify threats and close loopholes to protect its customers’ business systems from information loss.

EPAM Systems Fundamentals Summary

How do EPAM Systems's earnings and revenue compare to its market cap?
EPAM fundamental statistics
Market Cap	US$20.86b
Earnings (TTM)	US$366.26m
Revenue (TTM)	US$4.46b

56.9x

P/E Ratio

4.7x

P/S Ratio

Is EPAM overvalued?

See Fair Value and valuation analysis

Earnings & Revenue

Key profitability statistics from the latest earnings report
EPAM income statement (TTM)
Revenue	US$4.46b
Cost of Revenue	US$2.97b
Gross Profit	US$1.49b
Other Expenses	US$1.12b
Earnings	US$366.26m

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

n/a

Earnings per share (EPS)	6.38
Gross Margin	33.36%
Net Profit Margin	8.21%
Debt/Equity Ratio	1.4%

How did EPAM perform over the long term?

See historical performance and comparison

We’ve recently updated our valuation analysis.

Valuation

Is EPAM undervalued compared to its fair value, analyst forecasts and its price relative to the market?

Valuation Score

3/6

Valuation Score 3/6

Price-To-Earnings vs Peers
Price-To-Earnings vs Industry
Price-To-Earnings vs Fair Ratio
Below Fair Value
Significantly Below Fair Value
Analyst Forecast

Key Valuation Metric

Which metric is best to use when looking at relative valuation for EPAM?

Other financial metrics that can be useful for relative valuation.

The above table shows the n/a ratio for EPAM. This is calculated by dividing EPAM's market cap by their current preferred multiple.
What is EPAM's n/a Ratio?
n/a Ratio	0x
n/a	n/a
Market Cap	US$20.86b

EPAM key valuation metrics and ratios. From Price to Earnings, Price to Sales and Price to Book to Price to Earnings Growth Ratio, Enterprise Value and EBITDA.
Key Statistics
Enterprise Value/Revenue	4.4x
Enterprise Value/EBITDA	26.3x
PEG Ratio	1.3x

Price to Earnings Ratio vs Peers

How does EPAM's PE Ratio compare to its peers?

EPAM PE Ratio vs Peers

The above table shows the PE ratio for EPAM vs its peers. Here we also display the market cap and forecasted growth for additional consideration.
Company	PE	Estimated Growth	Market Cap
Peer Average	31.1x
IT Gartner	30.6x	-0.4%	US$22.5b
CTSH Cognizant Technology Solutions	13.5x	9.4%	US$30.6b
GLOB Globant	62x	29.7%	US$7.9b
DOX Amdocs	18.2x	7.4%	US$9.9b
EPAM EPAM Systems	56.9x	44.1%	US$20.9b

Price-To-Earnings vs Peers: EPAM is expensive based on its Price-To-Earnings Ratio (56.9x) compared to the peer average (31.1x).

Price to Earnings Ratio vs Industry

How does EPAM's PE Ratio compare vs other companies in the US IT Industry?

Price-To-Earnings vs Industry: EPAM is expensive based on its Price-To-Earnings Ratio (56.9x) compared to the US IT industry average (25.2x)

Price to Earnings Ratio vs Fair Ratio

What is EPAM's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.

EPAM PE Ratio vs Fair Ratio.
Fair Ratio
Current PE Ratio	56.9x
Fair PE Ratio	56.7x

Price-To-Earnings vs Fair Ratio: EPAM is expensive based on its Price-To-Earnings Ratio (56.9x) compared to the estimated Fair Price-To-Earnings Ratio (56.7x).

Share Price vs Fair Value

What is the Fair Price of EPAM when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

Below Fair Value: EPAM ($363.58) is trading below our estimate of fair value ($560.52)

Significantly Below Fair Value: EPAM is trading below fair value by more than 20%.

Analyst Price Targets

What is the analyst 12-month forecast and do we have any statistical confidence in the consensus price target?

Analyst Forecast: Target price is more than 20% higher than the current share price and analysts are within a statistically confident range of agreement.

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Future Growth

How is EPAM Systems forecast to perform in the next 1 to 3 years based on estimates from 13 analysts?

Future Growth Score

6/6

Future Growth Score 6/6

Earnings vs Savings Rate
Earnings vs Market
High Growth Earnings
Revenue vs Market
High Growth Revenue
Future ROE

44.1%

Forecasted annual earnings growth

Earnings and Revenue Growth Forecasts

Analyst Future Growth Forecasts

Earnings vs Savings Rate: EPAM's forecast earnings growth (44.1% per year) is above the savings rate (1.9%).

Earnings vs Market: EPAM's earnings (44.1% per year) are forecast to grow faster than the US market (14.8% per year).

High Growth Earnings: EPAM's earnings are expected to grow significantly over the next 3 years.

Revenue vs Market: EPAM's revenue (21.3% per year) is forecast to grow faster than the US market (7.7% per year).

High Growth Revenue: EPAM's revenue (21.3% per year) is forecast to grow faster than 20% per year.

Earnings per Share Growth Forecasts

Future Return on Equity

Future ROE: EPAM's Return on Equity is forecast to be high in 3 years time (22.1%)

Discover growth companies

Past Performance

How has EPAM Systems performed over the past 5 years?

Past Performance Score

1/6

Past Performance Score 1/6

Quality Earnings
Growing Profit Margin
Earnings Trend
Accelerating Growth
Earnings vs Industry
High ROE

27.8%

Historical annual earnings growth

Earnings and Revenue History

Quality Earnings: EPAM has a large one-off loss of $142.7M impacting its June 30 2022 financial results.

Growing Profit Margin: EPAM's current net profit margins (8.2%) are lower than last year (13.1%).

Past Earnings Growth Analysis

Earnings Trend: EPAM's earnings have grown significantly by 27.8% per year over the past 5 years.

Accelerating Growth: EPAM's has had negative earnings growth over the past year, so it can't be compared to its 5-year average.

Earnings vs Industry: EPAM had negative earnings growth (-8.1%) over the past year, making it difficult to compare to the IT industry average (19.2%).

Return on Equity

High ROE: EPAM's Return on Equity (14%) is considered low.

Discover strong past performing companies

Financial Health

How is EPAM Systems's financial position?

Financial Health Score

6/6

Financial Health Score 6/6

Short Term Liabilities
Long Term Liabilities
Debt Level
Reducing Debt
Debt Coverage
Interest Coverage

Financial Position Analysis

Short Term Liabilities: EPAM's short term assets ($2.4B) exceed its short term liabilities ($684.7M).

Long Term Liabilities: EPAM's short term assets ($2.4B) exceed its long term liabilities ($255.3M).

Debt to Equity History and Analysis

Debt Level: EPAM has more cash than its total debt.

Reducing Debt: EPAM had negative shareholder equity 5 years ago, but is now positive and has therefore improved.

Debt Coverage: EPAM's debt is well covered by operating cash flow (1398.4%).

Interest Coverage: EPAM earns more interest than it pays, so coverage of interest payments is not a concern.

Balance Sheet

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Dividend

What is EPAM Systems's current dividend yield, its reliability and sustainability?

Dividend Score

0/6

Dividend Score 0/6

Notable Dividend
High Dividend
Stable Dividend
Growing Dividend
Earnings Coverage
Cash Flow Coverage

Dividend Yield vs Market

EPAM Systems Dividend Yield vs Market

How does EPAM Systems dividend yield compare to the market?
Segment	Dividend Yield
Company (EPAM Systems)	n/a
Market Bottom 25% (US)	1.6%
Market Top 25% (US)	4.6%
Industry Average (IT)	1.6%
Analyst forecast in 3 Years (EPAM Systems)	0%

Notable Dividend: Unable to evaluate EPAM's dividend yield against the bottom 25% of dividend payers, as the company has not reported any recent payouts.

High Dividend: Unable to evaluate EPAM's dividend yield against the top 25% of dividend payers, as the company has not reported any recent payouts.

Stability and Growth of Payments

Stable Dividend: Insufficient data to determine if EPAM's dividends per share have been stable in the past.

Growing Dividend: Insufficient data to determine if EPAM's dividend payments have been increasing.

Earnings Payout to Shareholders

Earnings Coverage: Insufficient data to calculate payout ratio to determine if its dividend payments are covered by earnings.

Cash Payout to Shareholders

Cash Flow Coverage: Unable to calculate sustainability of dividends as EPAM has not reported any payouts.

Discover strong dividend paying companies

Management

How experienced are the management team and are they aligned to shareholders interests?

6.2yrs

Average management tenure

CEO

Arkadiy Dobkin (62 yo)

19.83yrs

Tenure

US$5,921,524

Compensation

Mr. Arkadiy Dobkin co-founded EPAM Systems, Inc., a subsidiary of B2BITS Corp. in 1993 and has been Chairman, Chief Executive Officer and President since December 2002. Mr. Dobkin began his career in Russi...

CEO Compensation Analysis

Arkadiy Dobkin's Compensation vs EPAM Systems Earnings

How has Arkadiy Dobkin's remuneration changed compared to EPAM Systems's earnings?
Date	Total Comp.	Salary	Company Earnings
Jun 30 2022	n/a	n/a	US$366m
Mar 31 2022	n/a	n/a	US$462m
Dec 31 2021	US$6m	US$688k	US$482m
Sep 30 2021	n/a	n/a	US$425m
Jun 30 2021	n/a	n/a	US$399m
Mar 31 2021	n/a	n/a	US$351m
Dec 31 2020	US$5m	US$625k	US$327m
Sep 30 2020	n/a	n/a	US$316m
Jun 30 2020	n/a	n/a	US$294m
Mar 31 2020	n/a	n/a	US$286m
Dec 31 2019	US$4m	US$588k	US$261m
Sep 30 2019	n/a	n/a	US$246m
Jun 30 2019	n/a	n/a	US$245m
Mar 31 2019	n/a	n/a	US$237m
Dec 31 2018	US$4m	US$538k	US$240m
Sep 30 2018	n/a	n/a	US$149m
Jun 30 2018	n/a	n/a	US$126m
Mar 31 2018	n/a	n/a	US$114m
Dec 31 2017	US$3m	US$488k	US$73m
Sep 30 2017	n/a	n/a	US$128m
Jun 30 2017	n/a	n/a	US$112m
Mar 31 2017	n/a	n/a	US$99m
Dec 31 2016	US$3m	US$438k	US$99m
Sep 30 2016	n/a	n/a	US$102m
Jun 30 2016	n/a	n/a	US$99m
Mar 31 2016	n/a	n/a	US$94m
Dec 31 2015	US$3m	US$400k	US$84m

Compensation vs Market: Arkadiy's total compensation ($USD5.92M) is below average for companies of similar size in the US market ($USD13.04M).

Compensation vs Earnings: Arkadiy's compensation has increased by more than 20% whilst company earnings have fallen more than 20% in the past year.

Leadership Team

Experienced Management: EPAM's management team is seasoned and experienced (6.2 years average tenure).

Board Members

Experienced Board: EPAM's board of directors are considered experienced (6.3 years average tenure).

Ownership

Who are the major shareholders and have insiders been buying or selling?

Insider Trading Volume

Insider Buying: EPAM insiders have only sold shares in the past 3 months.

Recent Insider Transactions

NYSE:EPAM Recent Insider Transactions by Companies or Individuals
Date	Value	Name	Entity	Shares	Max Price
18 Aug 22	SellUS$252,120	Gary Abrahams	Individual	557	US$452.64
07 Jun 22	SellUS$34,710	Elaina Shekhter	Individual	100	US$347.10
20 May 22	SellUS$134,000	Jason Peterson	Individual	400	US$335.00
10 May 22	SellUS$130,000	Jason Peterson	Individual	400	US$325.00
02 Dec 21	SellUS$519,376	Ronald Vargo	Individual	850	US$611.03
17 Nov 21	SellUS$495,507	Robert Segert	Individual	745	US$665.11

Ownership Breakdown

What is the ownership structure of EPAM?
Owner Type	Number of Shares	Ownership Percentage
State or Government	33,800	0.06%
Individual Insiders	1,746,325	3.0%
General Public	2,150,897	3.7%
Institutions	53,436,410	93.1%

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.

Top Shareholders

Top 25 shareholders own 72.81% of the company

Ownership	Name	Shares	Current Value	Change %	Portfolio %
16.25%	Capital Research and Management Company	9,324,681	$3.4b	12.07%	0.24%
10.98%	The Vanguard Group, Inc.	6,297,864	$2.3b	1.01%	0.05%
6.89%	BlackRock, Inc.	3,953,682	$1.4b	-11.78%	0.04%
4.71%	AllianceBernstein L.P.	2,703,171	$982.8m	30.64%	0.41%
4.64%	WCM Investment Management, LLC	2,659,477	$966.9m	-6.65%	2.31%
4.08%	J.P. Morgan Asset Management, Inc.	2,338,907	$850.4m	0.66%	0.16%
3.8%	State Street Global Advisors, Inc.	2,177,749	$791.8m	-11.9%	0.05%
2.9%	Arkadiy Dobkin	1,664,372	$605.1m	-0.03%	no data
2.21%	Lone Pine Capital LLC	1,266,683	$460.5m	0%	4.19%
1.96%	FMR LLC	1,125,900	$409.4m	50.57%	0.04%
1.89%	Geode Capital Management, LLC	1,082,964	$393.7m	1.31%	0.05%
1.38%	Teachers Insurance and Annuity Association-College Retirement Equities Fund	793,661	$288.6m	21.82%	0.1%
1.38%	UBS Asset Management	791,981	$287.9m	4.01%	0.06%
1.3%	Invesco Ltd.	743,892	$270.5m	11.48%	0.09%
1.24%	Northern Trust Global Investments	711,737	$258.8m	-4.9%	0.05%
1%	Harding Loevner LP	575,024	$209.1m	-12.05%	0.61%
0.85%	Norges Bank Investment Management	486,090	$176.7m	0%	0.02%
0.76%	Columbia Management Investment Advisers, LLC	435,305	$158.3m	24.72%	0.05%
0.76%	Invesco Capital Management LLC	433,224	$157.5m	-31.45%	0.13%
0.75%	BNY Mellon Asset Management	431,238	$156.8m	5.73%	0.04%
0.68%	Allianz Asset Management AG	391,629	$142.4m	-17.82%	0.13%
0.64%	Legal & General Investment Management Limited	366,424	$133.2m	-14.49%	0.04%
0.64%	Martin Currie Limited	365,370	$132.8m	-7.52%	1.75%
0.58%	Eaton Vance Management	331,862	$120.7m	52.65%	0.05%
0.55%	Charles Schwab Investment Management, Inc.	314,877	$114.5m	4.66%	0.03%

Ticker	Exchange	Primary Security	Security Type	Country	Currency	Listed on
EPAM	NYSE (New York Stock Exchange)	Yes	Common Shares	US	USD	Feb 2012
E3M	DB (Deutsche Boerse AG)	Yes	Common Shares	DE	EUR	Feb 2012
EPAM *	BMV (Bolsa Mexicana de Valores)	Yes	Common Shares	MX	MXN	Feb 2012
E2PA34	BOVESPA (Bolsa de Valores de Sao Paulo)		BDR EACH 60 REPR 1 COM	BR	BRL	Jan 2022

Data	Last Updated (UTC time)
Company Analysis	2022/10/03 00:00
End of Day Share Price	2022/10/03 00:00
Earnings	2022/06/30
Annual Earnings	2021/12/31