EXLS - Embedded Expectations Analysis - 2020 05 22
ExlService Holdings, Inc. (EXLS:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) earnings, with a 16.4x Uniform P/E, implying bearish expectations for the firm. Although management's concerns about margins, client engagement, and expenses suggest the potential for near-term headwinds, market expectations remain far too bearish, and longer-term equity outperformance is likely warrantedSpecifically, management may have concerns about the disruption and uncertainty caused by coronavirus, slippage from unfulfilled client demands, and the impact of reduced auto claims from the lack of vehicles on the road. Furthermore, they may lack confidence in their ability to mitigate work-from-home security and privacy issues, improve their Q1 margin profile, particularly in analytics, and share increased work-from-home costs with clients. Additionally, they may be overstating their ability to manage expenses, their client engagement, and the credit strength of their banking and financial services clients
Although management's concerns about margins, client engagement, and expenses suggest the potential for near-term headwinds, given its scalable solutions and robust economic moat, market expectations remain far too bearish, and longer-term equity outperformance is likely warranted for EXLS
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.
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