Valens Equity Weekly Insights - 2023 08 29
Genpact (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 like 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 driven by expansion into higher-value services and end markets.
Management confidence in the Q2 earnings call about utilizing AI technology to improve its high tech and healthcare businesses suggests the transformation towards higher value services is underway.
G
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- 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
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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
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