EPAM Systems (NYSE:EPAM) Valuation in Focus After FTSE All-World Index Removal

EPAM Systems (NYSE:EPAM) is back in the spotlight after being dropped from the FTSE All-World Index, a move that always catches investor attention. When a company exits a major index, it can immediately trigger buying and selling activity from funds that track those indices, pushing the share price up or down regardless of company fundamentals. For EPAM, this event may feel abrupt, but it tends to reflect changes in how the wider market is positioning itself rather than any underlying business shift. Zooming out, the bigger picture for EPAM shows a challenging period. Shares are down about 21% over the past year and have fallen by nearly a third year to date, with some of the largest drops coming in the past month. At the same time, EPAM continues to participate in industry conferences, such as its recent HR Tech presentation, but these have not been enough to offset sliding momentum. Long-term investors have also felt the impact, with the stock off more than 55% over three years. After this series of declines and the index-related shakeup, investors may be weighing whether the market is overlooking future value or if the risks are already reflected in EPAM’s price.

Most Popular Narrative: 25.9% Undervalued

According to the most widely followed narrative, EPAM Systems shares are trading well below perceived fair value, with analysts suggesting the market has yet to fully appreciate improving business momentum and company reorganization.

Expanding AI expertise and proprietary platforms are enabling EPAM to secure larger, high-value client engagements and move further up the value chain. Diversification across industries and geographies, coupled with operational efficiencies, is boosting resilience, supporting sustainable growth, and improving margins.

Curious about why analysts see so much upside? The driving forces behind this bullish price target come down to a blend of accelerated top-line growth, margin improvement, and future profit multiples that signal a major rerating opportunity. The specifics behind these projections might surprise you. Dig into the full narrative to discover the critical assumptions that fuel this 25% undervaluation call.

Result: Fair Value of $211.12 (UNDERVALUED)

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

However, persistent wage inflation and rising competition for IT talent could pressure EPAM's margins. This may challenge the optimistic undervaluation thesis despite recent progress.

Find out about the key risks to this EPAM Systems narrative.

Another View: Discounted Cash Flow Perspective

Our DCF model tells a similar story, indicating that EPAM might be undervalued according to future cash flow projections. This approach examines longer-term fundamentals. Still, can a single method really capture investor sentiment?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out EPAM Systems for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own EPAM Systems Narrative

If you have a different perspective or want to dive deeper into the numbers, you can craft your own view in just a few minutes. Do it your way

A good starting point is our analysis highlighting 3 key rewards investors are optimistic about regarding EPAM Systems.

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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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