EXLS - Embedded Expectations Analysis - 2020 01 06
ExlService Holdings (EXLS:USA) currently trades near corporate averages relative to UAFRS-based (Uniform) Earnings, with a 21.1x Uniform P/E. At these levels, the market has bearish expectations for the firm, but management's confidence about their Analytics segment revenue growth, Ops Management pipeline, and data and analytics capabilities suggest equity upside may be warranted.Specifically, management is confident in their Analytics segment revenue growth, the strength of their Ops Management pipeline, and the execution of their SCIO business client wins. In addition, they are confident in their EBITDA growth, data and analytics capabilities, and their ability to meet revenue guidance. Moreover, they are confident in the maturity of their employee benefits service offerings, the automation of work procedures, and their ability to recover from weakness in their Health Integrated segment.
ExlService Holdings is a holding company. Through its subsidiaries, the company is an operations management and analytics company. The company's operations management services involve the transfer to the company's business operations of a client such as claims processing, clinical operations, or financial transaction processing, after which the company administers and manages those operations for its client on an ongoing basis, or in case of consulting, consulting services related to transformation services, including digital transformation services. The company's Analytics services focus on driving business outcomes for its customers by generating data-driven insights across various parts of its customers' business.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
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