Valens Equity Weekly Insights - 2022 12 13
Genpact Limited (G) is expanding its focus on high-value tech consulting services in growth markets like fintech and underserved markets like manufacturing. Uniform Accounting highlights that the market still views Genpact as a lower-return BPO business, indicating equity upside.Genpact spun out of GE in 2007 as a pure-play BPO business. Since then, it has differentiated itself by building out its technology consulting services, and it is focusing on
expanding into new end markets like fintech and manufacturing. These clients are the company's fastest growing segment, and they are higher value to the business. As management continues growing this part of the business, and as American manufacturing
firms need to reinvest in the coming years, Genpact's Uniform ROA and growth should both
be stronger than the market expects.
Genpact's management is incentivized to keep driving growth and margin expansion by
venturing into higher-value services and end markets.
Management confidence in the Q3 earnings call about adding clients and growing its digital
transformation business suggests the transformation towards higher value services is
underway.
Silvergate (SI) and Vista Outdoor (VSTO) are being removed from the Conviction Long List.
Volatility in the crypto space, including FTX's bankruptcy, continues to hurt Silvergate's near-term prospects, and Vista's recent CFO departure and leverage position suggest it's
time to step away. We close Silvergate down 69%, and Vista down 23%.
G
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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