Rakesh Jhunjhunwala earned Rs 31 crore with this stock in three months

Ace investor Rakesh Jhunjhunwala made a profit of over Rs 31 crore from his investment in Firstsource Solutions share in three months. On March 24, 2020, share price of Firstsource Solutions hit 52-week low of Rs 20.65 on BSE. Jhunjhunwala held 1.43 crore shares or 2.06% stake on March 24 valuing his stake at Rs 29.52 crore in the information technology-enabled services (ITES) firm. Jhunjhunwala first bought 2.5 crore shares representing 3.8% stake of the company in July 2013.

Three months or 59 trading sessions after hitting 52-week low, the stock of ITES firm more than doubled to Rs 42.75 on June 23. That valued the stake of Jhunjhunwala to Rs 61.13 crore on June 23, assuming his shareholding has not changed in the current quarter.  

Share price of Firstsource Solutions rose 107.02% during the period. An investment of Rs 1 lakh in Firstsource Solutions stock on March 24, 2020 would have increased to Rs 2.07 lakh on June 23 due to value buying and strong fundamentals of the ITES firm.

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In Q4 of last fiscal, the ITES firm reported a marginal fall in net profit to Rs 92 crore against Rs 98 crore net profit in Q4 of 2018-19. However on a quarter-on-quarter basis, net profit rose compared to Rs 90 crore profit in Q3 of last fiscal.

Sales in Q4 climbed to Rs 1,080 crore against Rs 967 crore sales in Q4 of 2018-19. On a Q-o-Q basis too, sales rose from Rs 1,053 crore in Q3. Operating profit margin rose to 15% in Q4 against 14% in corresponding quarter of 2018-19.

Firstsource Solutions' competitors are Oracle Financial Services, Mphasis , L&T Technology, Hexaware Tech, NIIT Tech and Persistent Systems.

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For quarter ended March, promoters held 53.9% stake and FIIs owned 9.52% stake. While DIIs had 12.36% stake in Q4, public shareholders owned 23.85% stake.

Firstsource Solutions share was trading 1.61% lower at Rs 36.75 against previous close of Rs 37.35 today. The stock hit a 52-week high of Rs 55.30 on September 16, 2019.

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Share price of Firstsource Solutions has lost 25.46% in the last one year and fallen 10.48% since the beginning of this year. The small cap share has gained 16.85% in one month. Total 0.41 lakh shares changed hands amounting to turnover of Rs 15.25 crore on BSE.

Market cap of the firm stood at Rs 2,547 crore today. The firm has price to earnings ratio of 7.62 compared to industry PE of 10.63.

On the other hand, its peer Oracle Financial Services has PE ratio of 17.19. PE ratio is calculated by dividing the market price of a share by earnings per share. If a stock has PE ratio of 25, it means one needs to invest Rs 25 in the share to earn Rs 1.

Firstsource Solutions has a price to book ratio of 0.92 compared to P/B ratio of 3.82 for Oracle Financial Services. P/B ratio compares the price of stock (market value) to its book (accounting value).

This stock held by Jhunjhunwala hits all-time high, zooms 90% in 3 months

Ideally, price to book value of a stock should be higher than 1 but lesser than 3. A stock having book value higher than 1 is considered overvalued and conveys that the market is willing to pay more than each rupee of book value.

Firstsource Solutions seems undervalued in comparison to Oracle Financial Services when it comes to its price to book value. Book value of a company is measured by the difference between total assets and external liabilities.

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Debt to equity ratio of the firm stands at a comfortable 0.42 against -0.67 for Oracle Financial Services. Debt to equity ratio of more than 1.5 signals that the company may not be able to generate enough cash to satisfy its debt obligations.

Firstsource Solutions is a provider of a range of business process management services across the customer life cycle delivered through transaction processing. The company's segments include banking, financial services and insurance and non-banking, financial services and insurance. Its geographic segments include USA and Canada, UK, India and Rest of the world. It is involved in information technology-enabled services, including business process outsourcing.

Jhunjhunwala lost Rs 249 crore with this stock in a month