A recent study indicates that Indian Outsourcing Companies are quickly climbing the services added ladder and are beginning to compete with traditional western business service providers. Consultancy firm Katzenbach partners indicates that the relative value of growth of these companies is much higher than with traditional service providers. That means, that for every dollar of profit earned, the fluctuation in the price of the stock moves considerably relative to western competitors.
This is normally a characteristic of an overinflated stock. That may be the case with players like Wipro, Tata Consultancy and Infosys. However, on the other hand, this means that as the earnings of these companies increase, the multiple of the stock price will increase radically. As most Indian firms are concerned primarily with increasing market share, and are not as concerned with quarterly earnings reports or managing legacy costs, these stocks may be a good investment in the future. At the present, however, it appears that many people are already betting on high growth, and that as such, the growth of the stock price may slow in the near future. Gulf Times reports:
"The best of the Indian outsourcing companies derive 80-85% of their market capitalisation from investor growth expectations," said Nathaniel J Mass, a senior fellow with the New York-based Katzenbach Partners.
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