Is Now An Opportune Moment To Examine EPAM Systems, Inc. (NYSE:EPAM)?

Today we're going to take a look at the well-established EPAM Systems, Inc. (NYSE:EPAM). The company's stock received a lot of attention from a substantial price increase on the NYSE over the last few months. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s examine EPAM Systems’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for EPAM Systems

What's The Opportunity In EPAM Systems?

The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 28.11x is currently trading slightly below its industry peers’ ratio of 28.61x, which means if you buy EPAM Systems today, you’d be paying a reasonable price for it. And if you believe EPAM Systems should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. Is there another opportunity to buy low in the future? Since EPAM Systems’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What kind of growth will EPAM Systems generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. EPAM Systems' earnings over the next few years are expected to increase by 41%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? It seems like the market has already priced in EPAM’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at EPAM? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on EPAM, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for EPAM, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

It can be quite valuable to consider what analysts expect for EPAM Systems from their most recent forecasts. So feel free to check out our free graph representing analyst forecasts.

If you are no longer interested in EPAM Systems, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com