NTT DATA Group (OTCPK:NTDT.Y): Valuation Insights After Major AI Partnership Expansion with ServiceNow

NTT DATA Group (OTCPK:NTDT.Y) moved into focus after unveiling an expanded, multi-year partnership with ServiceNow. The agreement will see both firms co-develop and deliver AI-powered solutions for enterprise customers. This signals ambitious growth plans.

See our latest analysis for NTT DATA Group.

NTT DATA Group’s share price recently saw a sharp pullback, down 3.85% in the last session despite reporting an expanded AI partnership. However, it still boasts an impressive year-to-date gain of 18.92%. Over the past year, total shareholder return stands at a robust 30%, with momentum shifting between periods of rapid gains and sustained long-term growth.

If you’re looking for more opportunities beyond headline partnerships, now is a good time to broaden your investing horizons and discover fast growing stocks with high insider ownership

With shares pulling back despite robust long-term gains and groundbreaking partnerships, the question is whether NTT DATA Group’s growth potential is still underestimated or if the market has already priced in its next chapter.

Price-to-Earnings of 34.2x: Is it justified?

NTT DATA Group is currently trading at a price-to-earnings (P/E) ratio of 34.2x, well above both industry peers and sector averages, even after its recent share price dip.

The price-to-earnings ratio represents what investors are willing to pay today for a dollar of future earnings. In the technology sector, higher P/E ratios can sometimes be justified by rapid earnings growth or premium market positioning. However, a noticeably elevated P/E may also indicate that the stock is being priced for strong future growth that has yet to materialize.

NTT DATA Group’s P/E ratio of 34.2x is higher than the US IT industry average of 31.3x and far exceeds the peer group average of 19.7x. Compared to its estimated fair P/E ratio of 40.3x, the current multiple suggests investors remain optimistic, but the market has not fully embraced the aggressive growth implied by a "fair" valuation level.

Explore the SWS fair ratio for NTT DATA Group

Result: Price-to-Earnings of 34.2x (OVERVALUED)

However, slower-than-expected revenue growth or a sudden change in market sentiment could quickly challenge the optimistic outlook regarding NTT DATA Group’s valuation.

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

Build Your Own NTT DATA Group Narrative

Feel free to dive deeper into the data and craft your own perspective on NTT DATA Group's outlook. Shaping your own narrative is simple and takes 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.

Ready for Your Next Big Idea?

Don’t let opportunity pass you by. Use the Simply Wall Street Screener to pinpoint companies with growth, value, and momentum, perfectly matched to your investing goals.

• Unleash growth potential by zeroing in on these 855 undervalued stocks based on cash flows with strong cash flow fundamentals and attractive pricing.
• Build resilient income by targeting these 15 dividend stocks with yields > 3% known for consistent dividends and robust yields that can help power your portfolio’s stability.
• Capitalize on rapid trends by exploring these 25 AI penny stocks, which feature some of the most exciting innovators at the forefront of artificial intelligence advancements.

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