Overall EPAM gets a fundamental rating of 5 out of 10. We evaluated EPAM 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. EPAM is valied quite expensively at the moment, while it does show a decent growth rate.

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1. Profitability

2. Health

3. Growth

4. Valuation

5. Dividend

1. Profitability

1.1 Basic Checks

EPAM had positive earnings in the past year.
In the past year EPAM had a positive cash flow from operations.
In the past 5 years EPAM has always been profitable.
EPAM had a positive operating cash flow in each of the past 5 years.

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.
The Return On Invested Capital of EPAM (10.71%) is better than 78.41% of its industry peers.
EPAM had an Average Return On Invested Capital over the past 3 years of 11.99%. This 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

The Profit Margin of EPAM (7.01%) is better than 69.32% of its industry peers.
EPAM's Profit Margin has declined in the last couple of years.
Looking at the Operating Margin, with a value of 10.43%, EPAM is in the better half of the industry, outperforming 71.59% of the companies in the same industry.
In the last couple of years the Operating Margin of EPAM has declined.
The Gross Margin of EPAM (28.92%) is worse than 62.50% of its industry peers.
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.
Compared to 1 year ago, EPAM has less shares outstanding
EPAM has more shares outstanding than it did 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 9.08. This indicates that EPAM is financially healthy and has little risk of bankruptcy at the moment.
EPAM has a Altman-Z score of 9.08. This is amongst the best in the industry. EPAM outperforms 89.77% of its industry peers.
EPAM has a debt to FCF ratio of 0.05. This is a very positive value and a sign of high solvency as it would only need 0.05 years to pay back of all of its debts.
EPAM has a Debt to FCF ratio of 0.05. This is amongst the best in the industry. EPAM outperforms 92.05% of its industry peers.
EPAM has a Debt/Equity ratio of 0.01. This is a healthy value indicating a solid balance between debt and equity.
EPAM has a Debt to Equity ratio of 0.01. This is amongst the best in the industry. EPAM outperforms 82.95% of its industry peers.

		Industry Rank	Sector Rank
Debt/Equity	0.01
Debt/FCF	0.05
Altman-Z	9.08

ROIC/WACC1.18

WACC9.06%

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's Current ratio of 3.02 is fine compared to the rest 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.
With a decent Quick ratio value of 3.02, EPAM is doing good in 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

The Earnings Per Share has been growing slightly by 2.97% over the past year.
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.
Looking at the last year, EPAM shows a quite strong growth in Revenue. The Revenue has grown by 14.26% in the last year.
Measured over the past years, EPAM shows a quite strong growth in Revenue. The Revenue has been growing by 15.56% on average per year.

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

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

EPS Next Y7.22%

EPS Next 2Y8.1%

EPS Next 3Y9.19%

EPS Next 5Y5.17%

Revenue Next Year15.96%

Revenue Next 2Y11.41%

Revenue Next 3Y10.53%

Revenue Next 5Y7.81%

3.3 Evolution

The EPS growth rate is decreasing: in the next years the growth will be less than in the last years.
The Revenue growth rate is decreasing: in the next years the growth will be less than in the last years.

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4. Valuation

4.1 Price/Earnings Ratio

A Price/Earnings ratio of 19.73 indicates a rather expensive valuation of EPAM.
67.05% of the companies in the same industry are more expensive than EPAM, based on the Price/Earnings ratio.
Compared to an average S&P500 Price/Earnings ratio of 27.30, EPAM is valued a bit cheaper.
The Price/Forward Earnings ratio is 17.25, which indicates a rather expensive current valuation of EPAM.
68.18% of the companies in the same industry are more expensive than EPAM, based on the Price/Forward Earnings ratio.
The average S&P500 Price/Forward Earnings ratio is at 24.32. EPAM is valued slightly cheaper when compared to this.

		Industry Rank	Sector Rank
PE	19.73
Fwd PE	17.25

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.
Compared to the rest of the industry, the Price/Free Cash Flow ratio of EPAM is on the same level as its industry peers.

		Industry Rank	Sector Rank
P/FCF	26.36
EV/EBITDA	16.88

4.3 Compensation for Growth

The high PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates EPAM does not grow enough to justify the current Price/Earnings ratio.