The outlook for the global economy has taken a positive turn in the first half of 2023 as inflationary pressures have begun to ease. Hence, if you have got an extra $10 to spare, I would like you to consider investing in TDCX Inc. (TDCX), Crawford & Company (CRD.A), and Mistras Group, Inc. (MG).
Let’s dig deeper into their strong fundamentals and the industry’s growth prospects.
So far this year, the short-lived market turbulence that followed the collapse of Silicon Valley Bank last month did not deter investor optimism, leading U.S. stocks higher over the quarter. Moreover, recent data indicate that inflation is cooling, fostering expectations that the hiking cycle will likely come to an end.
On the backs of easing supply chain pressures and resilient labor markets to support recovery, KPMG forecasts world Gross Domestic Product (GDP) growth of 2.1% and inflation at 5.3% for 2023.
With improving market sentiments, businesses are ramping up their productivity and spurring business growth through outsourcing services. According to a survey by GoodFirms, 75.5% of participants choose to outsource business services to increase productivity.
In addition, the global business processes outsourcing market is anticipated to reach $374.75 billion in 2027, expanding at a CAGR of 3.7% and to $460.69 billion in 2032, growing at a CAGR of 4.2%.
Given this backdrop, quality stocks such as TDCX, CRD.A, and MG are well-positioned to capitalize on the industry’s tailwinds.
TDCX Inc. (TDCX)
Headquartered in Singapore, TDCX provides digital customer experience solutions. It offers three key service offerings: omnichannel CX solutions; sales and digital marketing services; and content monitoring and moderation services.
In terms of forward EV/EBITDA and EV/EBIT, TDCX is trading at 6.89x and 9.08x, 34.1% and 37.6% lower than the industry averages of 10.46x and 14.55x, respectively. Likewise, its forward Price/Cash Flow multiple of 10.01 is 19.4% lower than the industry average of 12.42.
TDCX’s total revenue increased 19.6% year-over-year to $493.92 million for the fiscal year that ended December 31, 2022. Its profit for the year grew marginally from the year-ago value to $78.04 million, while its adjusted net income rose 14.1% year-over-year to $92.52 million. The company’s adjusted EBITDA increased 8% year-over-year to $148.57 million. Also, its EPS increased marginally year-over-year to $0.64.
Street expects TDCX’s EPS and revenue for the quarter ending June 30, 2023, to increase 5% and 8.2% year-over-year to $0.16 and $125.90 million, respectively. It surpassed the consensus EPS estimates in each of the trailing four quarters.
The stock has gained marginally over the past five days to close the last trading session at $8.49.
TDCX’s POWR Ratings reflect this promising outlook. It has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has a B grade for Stability and Quality. Out of 52 stocks in the B-rated Outsourcing - Business Services industry, it is ranked #13. Click here to see the other ratings of TDCX for Growth, Value, Momentum, and Sentiment.
Crawford & Company (CRD.A)
CRD.A is the world’s largest independent provider of claims management and outsourcing solutions to carriers, brokers, and corporations, with an expansive global network serving clients in more than 70 countries. The company operates through four segments: North America Loss Adjusting; International Operations; Broadspire; and Platform Solutions.
In terms of forward non-GAAP P/E, CRD.A is trading at 0.55x, 71.9% lower than the industry average of 1.96x. Likewise, the stock’s forward EV/EBITDA and Price/Sales of 6.25x and 0.30x are 40% and 85.8% lower than the industry averages of 10.42x and 2.14x, respectively.
In the fourth quarter that ended on December 31, 2022, CRD.A’s revenue increased 10% year-over-year to $333.37 million. Its non-GAAP attributable net income increased 215.4% from the year-ago value to $11.37 million, while its non-GAAP EPS came in at $0.23, representing a 228.6% year-over-year improvement.
The consensus EPS estimate of $0.16 for the fiscal first quarter (ended March 31, 2023) represents a 6.7% improvement year-over-year. The consensus revenue estimate of $299.86 million for the to-be-reported quarter represents a 7.5% increase from the same period last year. The company has an impressive earnings surprise history, as it surpassed the consensus revenue estimates in three of the trailing four quarters.
CRD.A’s shares have gained 47.9% over the past six months and 55.6% year-to-date to close the last trading session at $8.65.
CRD.A’s strong fundamentals are reflected in its POWR Ratings. The company has an overall B rating, which translates to Buy in our proprietary rating system.
It has an A grade for Sentiment and a B for Growth and Stability. CRD.A is ranked #10 in the same industry. Click here to see the additional ratings for CRD.A (Value, Momentum, and Quality).
Mistras Group, Inc. (MG)
MG provides integrated solutions to protect technology-enabled assets. The company operates through three segments: Services; International; and Products and Systems.
In terms of forward EV/Sales, MG is trading at 0.63x, 60.6% lower than the industry average of 1.59x. Its forward Price/Sales multiple of 0.32 is 75.1% lower than the industry average of 1.27. In addition, the stock’s forward EV/EBITDA ratio of 6.97x compares to the industry average of 10.46x.
For the fiscal fourth quarter that ended on December 31, 2022, MG’s revenue amounted to $168.22 million, while its gross profit increased 2.7% year-over-year to $50.94 million. Its income from operations improved 151.6% from the year-ago value to $5.80 million.
During the same period, non-GAAP net income attributable to MG came in at $2.76 million, up 149.5% year-over-year, while its non-GAAP EPS amounted to $0.09 per share, representing a 125% increase from the prior-year quarter. Also, its adjusted EBITDA stood at $15.72 million, up 8% year-over-year.
Analysts expect MG’s revenue and EPS for the second quarter (ending June 2023) to increase 5.6% and 40% year-over-year to $189.11 million and $0.21, respectively. The stock has gained 62.1% over the past six months to close the last trading session at $7.62.
MG’s solid prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. It has a B grade for Growth, Value, and Sentiment. Within the same industry, it is ranked #5.
To see the additional POWR Ratings of MG for Momentum, Stability, and Quality, click here.
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TDCX shares were trading at $8.56 per share on Wednesday afternoon, up $0.07 (+0.82%). Year-to-date, TDCX has declined -30.86%, versus a 7.29% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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