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 is in great health and has no worries on liquidiy or solvency at all, but the profibility rating is only average. EPAM is quite expensive at the moment. 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

In the past year EPAM was profitable.
EPAM had a positive operating cash flow in the past year.
EPAM had positive earnings in each of the past 5 years.
Each year in the past 5 years EPAM had a positive operating cash flow.

1.2 Ratios

Looking at the Return On Assets, with a value of 7.67%, EPAM is in the better half of the industry, outperforming 77.27% of the companies in the same industry.
EPAM has a Return On Equity of 9.97%. This is in the better half of the industry: EPAM outperforms 65.91% of its industry peers.
EPAM has a Return On Invested Capital of 10.71%. This is in the better half of the industry: EPAM outperforms 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

EPAM has a better Profit Margin (7.01%) than 69.32% of its industry peers.
EPAM's Profit Margin has declined in the last couple of years.
EPAM's Operating Margin of 10.43% is fine compared to the rest of the industry. EPAM outperforms 71.59% of its industry peers.
EPAM's Operating Margin has declined in the last couple of years.
EPAM's Gross Margin of 28.92% is on the low side compared to the rest of the industry. EPAM is outperformed by 62.50% of its industry peers.
In the last couple of years the Gross Margin of EPAM has declined.

		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

With a Return on Invested Capital (ROIC) just above the Cost of Capital (WACC), EPAM is creating some value.
The number of shares outstanding for EPAM has been reduced compared to 1 year ago.
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

An Altman-Z score of 9.05 indicates that EPAM is not in any danger for bankruptcy at the moment.
With an excellent Altman-Z score value of 9.05, EPAM belongs to the best of the industry, outperforming 89.77% of the companies in the same industry.
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.
The Debt to FCF ratio of EPAM (0.05) is better than 92.05% of its industry peers.
A Debt/Equity ratio of 0.01 indicates that EPAM is not too dependend on debt financing.
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	9.05

ROIC/WACC1.15

WACC9.29%

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 better Current ratio (3.02) than 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.
EPAM has a better Quick ratio (3.02) than 78.41% of its industry peers.

		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.
EPAM shows quite a strong growth in Revenue. In the last year, the Revenue has grown by 14.26%.
EPAM shows quite a strong growth in Revenue. Measured over the last years, the Revenue has been growing by 15.56% yearly.

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

EPAM is expected to show a small growth in Earnings Per Share. In the coming years, the EPS will grow by 5.17% yearly.
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

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

Based on the Price/Earnings ratio of 19.86, the valuation of EPAM can be described as rather expensive.
Based on the Price/Earnings ratio, EPAM is valued a bit cheaper than the industry average as 67.05% of the companies are valued more expensively.
When comparing the Price/Earnings ratio of EPAM to the average of the S&P500 Index (27.25), we can say EPAM is valued slightly cheaper.
With a Price/Forward Earnings ratio of 17.31, EPAM is valued on the expensive side.
68.18% of the companies in the same industry are more expensive than EPAM, based on the Price/Forward Earnings ratio.
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	19.86
Fwd PE	17.31

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	26.52
EV/EBITDA	16.81

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.