Infosys trades at a sizeable valuation discount vis-à-vis bigger rival TCS, and the large share buyback should also help support the former’s stock

Shares of Infosys Ltd have risen 27% in the past year, outperforming the Nifty IT index’s 18% gain. Apart from the fact that the shares came off a low base, there have been signs of improvement in growth rates under the new CEO, Salil Parekh. In that backdrop, Infosys Q3 results come as a big reinforcement of that belief.

Growth is certainly back to decent levels. The constant currency revenue growth of 10.1% from a year ago is notably higher than Street estimates. Importantly, Infosys also revised FY19 growth upwards by about 100 basis points. This implies growth momentum should continue into the fourth quarter, and return to double-digit growth is certainly something that will excite investors.

While the Infosys Q3 results were declared after Indian markets closed on Friday, the company’s American depository receipts rose more than 5% on the New York Stock Exchange.

Traditionally, the second half of the fiscal year is relatively softer for software companies due to fewer working days on account of Christmas and New Year holidays. So for Infosys to raise its forecast based on its second-half performance is quite unusual. The firm raised its growth forecast to 8.5-9% from 6-8% earlier.

Deal wins have been strong, too. Infosys won 14 large deals amounting to about $1.5 billion last quarter. Cumulatively deal wins so far in FY19 stand at $4.7 billion, more than double the orders Infosys booked in the year-ago period.

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