NTT DATA Group (OTCPK:NTDT.Y): How the ServiceNow AI Partnership Shapes Its Current Valuation

NTT DATA Group (OTCPK:NTDT.Y) and ServiceNow have unveiled an expanded strategic partnership focused on creating and jointly delivering AI-powered solutions to boost operational efficiency for enterprise customers worldwide. This multi-year agreement further strengthens NTT DATA's role in AI transformation initiatives.

See our latest analysis for NTT DATA Group.

NTT DATA Group’s collaboration with ServiceNow comes as the company’s 1-year total shareholder return has risen an impressive 27.4%, reflecting optimism around its ambitious AI initiatives and consistent operational execution. Despite some volatility in the past quarter, momentum has generally been building. The share price is up over 24% year-to-date, and 5-year total returns nearing 93% signal long-term value creation.

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With shares already riding a wave of AI optimism, investors now face a key dilemma: is there further upside to be captured, or are recent gains already pricing in NTT DATA’s next leg of growth?

Price-to-Earnings of 27.4x: Is it justified?

NTT DATA Group is currently trading at a price-to-earnings (P/E) ratio of 27.4x, which prices in a significant earnings premium relative to its peers and recent performance. At the last close of $23.50, the market is clearly attaching a high value to each unit of reported earnings.

The price-to-earnings ratio measures how much investors are willing to pay per dollar of net income. For a tech-driven, growing IT services provider like NTT DATA, the P/E can indicate market expectations for future growth, quality of earnings, or simply the scarcity value of the shares in the current environment.

However, NTT DATA’s P/E sits above both the US IT industry average of 26.9x and well ahead of the peer group average of 19x. This signals that the company is seen as a top-tier operator, or that the market is betting on faster or more reliable future growth. Compared to its estimated fair P/E of 35.2x, there is room for the multiple to expand further if recent growth trends continue or accelerate.

Explore the SWS fair ratio for NTT DATA Group

Result: Price-to-Earnings of 27.4x (OVERVALUED)

However, slower revenue growth or a dip in net income margins could quickly reverse optimism. This would remind investors that sentiment may shift as fundamentals evolve.

Find out about the key risks to this NTT DATA Group narrative.

Build Your Own NTT DATA Group Narrative

Consider digging into the evidence for yourself and shaping a story that reflects your own view. After all, anyone can craft a personal narrative in just a few minutes. Do it your way

A great starting point for your NTT DATA Group research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.

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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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