Fiduciary Management, an investment management firm, published its “Small Cap Strategy” third quarter 2022 investor letter – a copy of which can be downloaded here. The FMI Small Cap Strategy declined approximately 1.0% (gross)/1.2% (net) in the September quarter compared to a 2.19% decline in the Russell 2000 Index and a 4.61% loss in the Russell 2000 Value Index. Try to spare some time to check the fund’s top 5 holdings for you to have an idea about their best stock picks this 2022.
In its Q3 2022 investor letter, Fiduciary Management Small Cap Strategy mentioned Genpact Limited (NYSE:G) and explained its insights for the company. Founded in 1997, Genpact Limited (NYSE:G) is a New York, New York-based business process management company with an $8.4 billion market capitalization. Genpact Limited (NYSE:G) delivered a -13.39% return since the beginning of the year, while its 12-month returns are down by -10.25%. The stock closed at $45.97 per share on November 08, 2022.
Here is what Fiduciary Management Small Cap Strategy has to say about Genpact Limited (NYSE:G) in its Q3 2022 investor letter:
“Genpact is a global business process management and outsourcing provider that works with clients to help them design, transform, and run business-critical operations. Genpact reports under two segments: Data-Tech-AI (~45% of revenue) and Digital Operations (~55% of revenue). Data-Tech-AI consists of client projects where Genpact is designing, building, and transforming businesses using technology. Digital Operations consists of more traditional business process outsourcing work such as operating and streamlining workflows and processes. The company has broad exposure across a number of industry verticals, employs over 114,000 professionals around the globe, and operates in over 30 countries.
Genpact is an industry-leading provider of business process outsourcing and digital transformational services and has experience running thousands of processes for hundreds of Fortune Global 500 clients. Its process excellence and proprietary methodologies of delivery have been developed and fine-tuned over its two decades+ of operations. The company estimates that more than 80% of its revenues are somewhat recurring in nature, with average deal length around 3 years and annual client retention in the high-90 percentage range. Over the trailing 3, 5, and 10-year periods, Genpact has grown revenue at an average rate of 10.1%, 9.5%, and 9.6%, respectively. The company expects organic growth to exceed 10% per year over the next several years, along with accelerated margin expansion through scale efficiencies. Genpact’s solutions provide customers with a tangible return on investment primarily by helping customers decrease costs, drive growth, and reduce risks. The company estimates its current total addressable market opportunity is approximately $750 billion and growing in the high single digit percent range annually. Over the trailing 5-year period, the company’s ROIC has averaged approximately 12%, which exceeds its cost of capital. Genpact has a good balance sheet with a net debt-to-EBITDA ratio of 1.7 times.
Genpact trades (on a GAAP basis) at a forward price-to-earnings multiple of 17.4 times and a price-to-sales multiple of 1.9 times, both of which are roughly a standard deviation below the 10-year average. Our expectation for accelerating organic growth and margin expansion over the next several years supports a valuation multiple above the company’s historical average. The stock trades at a significant discount to the Russell 2000, despite having above-average business quality and a higher expected EPS growth rate…” (Click here to see the full text)
Our calculations show that Genpact Limited (NYSE:G) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Genpact Limited (NYSE:G) was in 24 hedge fund portfolios at the end of the second quarter of 2022, compared to 28 funds in the previous quarter. Genpact Limited (NYSE:G) delivered a -2.79% return in the past 3 months.
In October 2022, we also shared another hedge fund’s views on Genpact Limited (NYSE:G) in another article. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q3 page.
Disclosure: None. This article is originally published at Insider Monkey.