EPAM gets a fundamental rating of 5 out of 10. The analysis compared the fundamentals against 88 industry peers in the IT Services industry. EPAM has an excellent financial health rating, but there are some minor concerns on its profitability. While showing a medium growth rate, EPAM is valued expensive at the moment.

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1. Profitability

2. Health

3. Growth

4. Valuation

5. Dividend

1. Profitability

1.1 Basic Checks

In the past year EPAM was profitable.
EPAM had a positive operating cash flow in the past year.
Each year in the past 5 years EPAM has been profitable.
In the past 5 years EPAM always reported a positive cash flow from operatings.

1.2 Ratios

EPAM has a better Return On Assets (7.67%) than 77.27% of its industry peers.
EPAM has a better Return On Equity (9.97%) than 65.91% of its industry peers.
Looking at the Return On Invested Capital, with a value of 10.71%, EPAM is in the better half of the industry, outperforming 78.41% of the companies in the same industry.
The Average Return On Invested Capital over the past 3 years for EPAM is significantly below the industry average of 29.06%.

		Industry Rank	Sector Rank
ROA	7.67%
ROE	9.97%
ROIC	10.72%

ROA(3y)9.87%

ROA(5y)11.06%

ROE(3y)12.84%

ROE(5y)14.88%

ROIC(3y)11.99%

ROIC(5y)12.85%

1.3 Margins

Looking at the Profit Margin, with a value of 7.01%, EPAM is in the better half of the industry, outperforming 69.32% of the companies in the same industry.
In the last couple of years the Profit Margin of EPAM has declined.
With a decent Operating Margin value of 10.43%, EPAM is doing good in the industry, outperforming 71.59% of the companies in the same industry.
EPAM's Operating Margin has declined in the last couple of years.
With a Gross Margin value of 28.92%, EPAM is not doing good in the industry: 62.50% of the companies in the same industry are doing better.
EPAM's Gross Margin has declined in the last couple of years.

		Industry Rank	Sector Rank
OM	10.43%
PM (TTM)	7.01%
GM	28.92%

OM growth 3Y-7.14%

OM growth 5Y-2.63%

PM growth 3Y-9.14%

PM growth 5Y-3.32%

GM growth 3Y-3.28%

GM growth 5Y-2.67%

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ROA

ROE

ROIC

Operating and Profit Margin

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2. Health

2.1 Basic Checks

The Return on Invested Capital (ROIC) is just above the Cost of Capital (WACC), so EPAM is still creating some value.
EPAM has less shares outstanding than it did 1 year ago.
The number of shares outstanding for EPAM has been increased compared to 5 years ago.
Compared to 1 year ago, EPAM has an improved debt to assets ratio.

2.2 Solvency

EPAM has an Altman-Z score of 9.05. This indicates that EPAM is financially healthy and has little risk of bankruptcy at the moment.
EPAM has a Altman-Z score of 9.05. This is amongst the best in the industry. EPAM outperforms 89.77% of its industry peers.
The Debt to FCF ratio of EPAM is 0.05, which is an excellent value as it means it would take EPAM, only 0.05 years of fcf income to pay off all of its debts.
Looking at the Debt to FCF ratio, with a value of 0.05, EPAM belongs to the top of the industry, outperforming 92.05% of the companies in the same industry.
A Debt/Equity ratio of 0.01 indicates that EPAM is not too dependend on debt financing.
Looking at the Debt to Equity ratio, with a value of 0.01, EPAM belongs to the top of the industry, outperforming 82.95% of the companies in the same industry.

		Industry Rank	Sector Rank
Debt/Equity	0.01
Debt/FCF	0.05
Altman-Z	9.05

ROIC/WACC1.18

WACC9.05%

2.3 Liquidity

EPAM has a Current Ratio of 3.02. This indicates that EPAM is financially healthy and has no problem in meeting its short term obligations.
EPAM has a Current ratio of 3.02. This is in the better half of the industry: EPAM outperforms 78.41% of its industry peers.
A Quick Ratio of 3.02 indicates that EPAM has no problem at all paying its short term obligations.
Looking at the Quick ratio, with a value of 3.02, EPAM is in the better half of the industry, outperforming 78.41% of the companies in the same industry.

		Industry Rank	Sector Rank
Current Ratio	3.02
Quick Ratio	3.02

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WACC

Debt/Equity

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Altman-Z score

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3. Growth

3.1 Past

EPAM shows a small growth in Earnings Per Share. In the last year, the EPS has grown by 2.97%.
Measured over the past years, EPAM shows a quite strong growth in Earnings Per Share. The EPS has been growing by 14.89% on average per year.
EPAM shows quite a strong growth in Revenue. In the last year, the Revenue has grown by 14.26%.
The Revenue has been growing by 15.56% on average over the past years. This is quite good.

EPS 1Y (TTM)2.97%

EPS 3Y6.34%

EPS 5Y14.89%

EPS Q2Q%-1.28%

Revenue 1Y (TTM)14.26%

Revenue growth 3Y7.95%

Revenue growth 5Y15.56%

Sales Q2Q%19.43%

3.2 Future

The Earnings Per Share is expected to grow by 5.17% on average over the next years.
Based on estimates for the next years, EPAM will show a small growth in Revenue. The Revenue will grow by 7.81% on average per year.

EPS Next Y7.3%

EPS Next 2Y8.24%

EPS Next 3Y9.28%

EPS Next 5Y5.17%

Revenue Next Year15.96%

Revenue Next 2Y11.41%

Revenue Next 3Y10.53%

Revenue Next 5Y7.81%

3.3 Evolution

When comparing the EPS growth rate of the last years to the growth rate of the upcoming years, we see that the growth is decreasing.
When comparing the Revenue growth rate of the last years to the growth rate of the upcoming years, we see that the growth is decreasing.

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4. Valuation

4.1 Price/Earnings Ratio

EPAM is valuated rather expensively with a Price/Earnings ratio of 19.66.
Compared to the rest of the industry, the Price/Earnings ratio of EPAM indicates a somewhat cheap valuation: EPAM is cheaper than 67.05% of the companies listed in the same industry.
EPAM is valuated rather cheaply when we compare the Price/Earnings ratio to 27.21, which is the current average of the S&P500 Index.
A Price/Forward Earnings ratio of 17.14 indicates a rather expensive valuation of EPAM.
Compared to the rest of the industry, the Price/Forward Earnings ratio of EPAM indicates a somewhat cheap valuation: EPAM is cheaper than 68.18% of the companies listed in the same industry.
When comparing the Price/Forward Earnings ratio of EPAM to the average of the S&P500 Index (25.98), we can say EPAM is valued slightly cheaper.

		Industry Rank	Sector Rank
PE	19.66
Fwd PE	17.14

4.2 Price Multiples

Compared to the rest of the industry, the Enterprise Value to EBITDA ratio of EPAM indicates a somewhat cheap valuation: EPAM is cheaper than 65.91% of the companies listed in the same industry.
EPAM's Price/Free Cash Flow is on the same level as the industry average.

		Industry Rank	Sector Rank
P/FCF	26.25
EV/EBITDA	16.81

4.3 Compensation for Growth

The high PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates an expensive valuation of the company.

PEG (NY)2.69

PEG (5Y)1.32

EPS Next 2Y8.24%

EPS Next 3Y9.28%

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5. Dividend

5.1 Amount

No dividends for EPAM!.

		Industry Rank	Sector Rank
Dividend Yield	0%

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EPAM SYSTEMS INC / EPAM FAQ

What is the fundamental rating for EPAM stock?

ChartMill assigns a fundamental rating of 5 / 10 to EPAM.

What is the valuation status for EPAM stock?

ChartMill assigns a valuation rating of 3 / 10 to EPAM SYSTEMS INC (EPAM). This can be considered as Overvalued.

What is the profitability of EPAM stock?

EPAM SYSTEMS INC (EPAM) has a profitability rating of 5 / 10.

What is the valuation of EPAM SYSTEMS INC based on its PE and PB ratios?

The Price/Earnings (PE) ratio for EPAM SYSTEMS INC (EPAM) is 19.66 and the Price/Book (PB) ratio is 3.23.