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Genpact (G) Up on Strong Clientele & Acquisitions, Debt Ails

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Genpact Limited’s (G - Free Report) shares have gained 14.4% over the past six months, outperforming the 12.4% rise of the Zacks S&P 500 composite. The company is currently riding on its dominant presence in the BPO services market, strong customer base and strategic acquisitions.

Genpact recently reported third-quarter 2021 adjusted EPS of 66 cents that outpaced the Zacks Consensus Estimate by 15.8% and inched up 18% year over year. Revenues amounted to $1.02 billion, which beat the consensus estimate by 0.4% and increased 9% year over year.

How is Genpact Doing?

Genpact is a dominant name in the BPO services market based on domain expertise in business analytics, digital and consulting services. The company is a leading provider of industry-specific solutions for the Industrial Internet of Things (IIoT), user experience, order and supply chain management, data engineering, digital content management and risk management, direct procurement and logistics services, aftermarket services support, industrial asset optimization, and engineering services. Genpact’s focus on integrating process, analytics and digital technologies, along with its deep domain expertise, is helping it to win customers on a regular basis. We expect an expanding customer base, stringent cost control, strategic acquisitions and aggressive share repurchase to drive Genpact's overall results in the long haul.

Artificial Intelligence (AI) presents significant growth opportunity for Genpact. The company’s Digital Smart Enterprise Processes (Digital SEPs) is a patented approach to enhance the performance of clients’ business processes.  Digital SEPs decrease inefficiency and improve process quality using AI, advanced domain-specific digital technologies, Lean Six Sigma methodologies and experience-centric principles. Further, Genpact Cora is an automation to AI-based platform that combines the company’s proprietary automation, analytics and AI technologies into a single common platform, and accelerates clients’ digital transformations. Acquisitions like Rage Framework and design thinking-based companies, such as Tandem Seven, have also expanded the Genpact’s AI product portfolio. We believe that Genpact is well positioned to take advantage of future improvement in the AI space.

Genpact is benefiting from a strong clientele worldwide. The company serves almost one fourth of the Global Fortune 500, including big names such as AstraZeneca, Novartis, Bayer, Dentsu, AXA, Hitachi, Konica Minolta, Heineken, Santander, Synchrony Financial and Sysco. The company's Global Client base has improved rapidly over the last five years (2015-2020) with revenues increasing at a healthy CAGR of 10% to reach $3.3 billion in 2020. Global Clients, as a percentage of total revenues, increased from approximately 81% in 2015 to approximately 88% in 2020. We believe that Genpact’s expertise in providing BPO services will continue to expand customer base in the long run.

Genpact’s cash and cash equivalent balance of $922 million at the end of the third-quarter 2021 was well below the long-term debt level of $1.3 billion underscoring that the company doesn’t have enough cash to meet this debt burden. The cash level can, however, meet the short-term debt of $383 million.

Zacks Rank and Stocks to Consider

Genpact currently carries a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the broader Business Services sector are Avis Budget (CAR - Free Report) and Cross Country Healthcare (CCRN - Free Report) sporting a Zacks Rank #1, and Charles River Associates (CRAI - Free Report) , carrying a Zacks Rank #2 (Buy).

Avis Budget has an expected earnings growth rate of 398.1% for the current year. The company has a trailing four-quarter earnings surprise of 76.9%, on average.

Avis Budget’s shares have surged 673.8% in the past year. The company has a long-term earnings growth of 27.5%.

Cross Country Healthcare has an expected earnings growth rate of 397.8% for the current year. The company has a trailing four-quarter earnings surprise of 75%, on average.

Cross Country Healthcare’s shares have surged 236.9% in the past year. The company has a long-term earnings growth of 21.5%.

Charles River Associates has an expected earnings growth rate of 61.2% for the current year. The company has a trailing four-quarter earnings surprise of 51%, on average.

Charles River’s shares have surged 135.7% in the past year. The company has a long-term earnings growth of 15.5%.