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Endava Ltd (DAVA)
NYSE:DAVA
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Endava
(NYSE:DAVA)
57Neutral
Positive Factors
AI Adoption
DAVA remains well-positioned to benefit from AI adoption, setting up favorable risk-reward despite the choppiness in growth in recent quarters.
Earnings
Efforts to improve profitability should yield improved adjusted EPS, now expected to be higher than prior estimates.
Technical Capabilities
DAVA's Investor Day showcased its technical competencies that make it well-positioned to capture emerging GenAI pre-requisite spend by organizations.
Negative Factors
Demand Weakness
Entering CY25, DAVA encountered weaker demand in certain geos amid macro concerns that led to some ramp downs and extended decision-making.
Investor Sentiment
Mixed 2Q results and a cut to the FY25 growth guide understandably weighs further on investor sentiment.
Revenue Guide
Revenue guide lowered on weaker discretionary spend.
Endava (DAVA) vs. S&P 500 (SPY)
Market Cap
$1.18B
Dividend YieldN/A
Average Volume (3M)578.91K
Price to Earnings (P/E)166.7
Beta (1Y)1.68
Revenue Growth2.06%
EPS Growth-91.82%
CountryUS
Employees11,668
SectorTechnology
Sector Strength44
IndustrySoftware - Infrastructure
Share Statistics
EPS (TTM)0.12
Shares Outstanding42,433,780
10 Day Avg. Volume480,142
30 Day Avg. Volume578,914
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)1.33
Price to Cash Flow (P/CF)N/A
P/FCF Ratio0.00
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$35.50Price Target Upside81.96% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering6
Endava Business Overview & Revenue Model
Company DescriptionEndava plc provides technology services for clients in the consumer products, healthcare, mobility, and retail verticals in Europe, Latin America, North America, and internationally. The company offers technology and digital advisory services for payments and financial services, and TMT sectors; IT strategies; business analysis services; program management services; digital product strategy services; and architecture, extended reality, machine learning and artificial intelligence, product design, and user experience and visual design services. It also engages in the identifying, defining, and embedding collaborative data and analytics; and provision of automated testing, cloud native software engineering, continuous delivery, distributed agile delivery, intelligent automation, secure development, agile applications management, cloud infrastructure, DevSecOps, service delivery, smart desk, and telemetry and monitoring services. The company was founded in 2000 and is headquartered in London, the United Kingdom.
How the Company Makes MoneyEndava makes money through a combination of project-based and managed services contracts. Its revenue streams primarily include fees from software development, consulting, and IT services, which are often structured as time and materials or fixed-price contracts. The company benefits from long-term partnerships with clients, which contribute to recurring revenue and stability. Additionally, Endava's strategic focus on high-growth sectors and investment in emerging technologies helps to drive demand for its services.
Endava Financial Statement Overview
Summary
Endava demonstrates strong financial fundamentals with consistent revenue growth and operational efficiency. However, declining net profit margins and ROE in the TTM indicate potential challenges in profitability. The company has a solid balance sheet with low leverage, supporting long-term financial stability. Effective cash flow management continues to be a strength, though negative investing cash flows could pose future risks.Income Statement
Endava's income statement shows solid performance with a TTM gross profit margin of 22.91% and an EBIT margin of 0.76%. There is a notable decline in net profit margin to 0.72% in the TTM, compared to 2.31% in the previous annual period. Revenue growth has slowed slightly in the TTM with only a 2.52% increase compared to the previous period. Despite the decline in profitability margins, the company maintains a positive EBITDA margin of 3.61%, indicating operational stability.72
Positive
Balance Sheet
The balance sheet shows a moderate debt-to-equity ratio of 0.27, reflecting prudent leverage management. The equity ratio stands at 66.78%, suggesting a strong capital structure with substantial equity backing. However, the return on equity (ROE) has decreased to 0.84% in the TTM, indicating a drop in profitability efficiency relative to equity. Overall, the company maintains a solid financial position with a focus on equity financing.65
Positive
Cash Flow
Endava's cash flow statement features a decrease in operating cash flow to net income ratio to 7.12 in the TTM, showing robust cash generation relative to net income. The free cash flow to net income ratio is 6.24, indicating effective cash flow management despite a decline in free cash flow growth. The ongoing challenge is the negative trend in investing cash flows, reflecting potential risks in investment activities.68
Positive
| Breakdown | |||||
| TTM | Jun 2024 | Jun 2023 | Jun 2022 | Jun 2021 | Jun 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 759.42M | 740.76M | 794.73M | 654.76M | 446.30M | 350.95M | Gross Profit |
| 174.04M | 179.71M | 264.08M | 217.93M | 153.83M | 100.15M | EBIT |
| 5.78M | 20.14M | 112.84M | 67.89M | 38.40M | 932.00K | EBITDA |
| 27.43M | 72.19M | 150.77M | 96.86M | 81.27M | 19.66M | Net Income Common Stockholders |
| 5.51M | 17.12M | 94.16M | 83.09M | 43.45M | 19.99M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 25.07M | 62.54M | 164.76M | 163.20M | 70.45M | 101.91M | Total Assets |
| 155.94M | 1.01B | 770.12M | 621.86M | 473.21M | 360.94M | Total Debt |
| 38.96M | 202.76M | 69.01M | 55.90M | 63.69M | 53.37M | Net Debt |
| 13.90M | 140.40M | -95.69M | -106.91M | -6.20M | -47.96M | Total Liabilities |
| 96.51M | 374.44M | 198.81M | 189.13M | 172.54M | 124.62M | Stockholders Equity |
| 59.42M | 639.46M | 571.31M | 432.72M | 300.67M | 236.33M |
| Cash Flow | Free Cash Flow | ||||
| 34.33M | 48.91M | 110.84M | 106.75M | 82.24M | 30.36M | Operating Cash Flow |
| 39.19M | 54.39M | 124.52M | 120.72M | 88.35M | 40.24M | Investing Cash Flow |
| -284.94M | -290.32M | -110.85M | -23.88M | -107.09M | -29.75M | Financing Cash Flow |
| 107.68M | 135.06M | -11.00M | -5.08M | -11.92M | 20.88M |
Endava Technical Analysis
Negative
19.51
Price Trends
27.02
Negative
28.14
Negative
28.31
Negative
Market Momentum
-1.84
Negative
24.74
Positive
7.58
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For DAVA, the sentiment is Negative. The current price of 19.51 is below the 20-day moving average (MA) of 21.54, below the 50-day MA of 27.02, and below the 200-day MA of 28.31, indicating a bearish trend. The MACD of -1.84 indicates Negative momentum. The RSI at 24.74 is Positive, neither overbought nor oversold. The STOCH value of 7.58 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for DAVA.
Endava Risk Analysis
Endava disclosed 75 risk factors in its most recent earnings report. Endava reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Endava Peers Comparison
Overall Rating
UnderperformOutperform
Sector (57)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
75 Outperform | $76.25B | 22.76 | 33.16% | 2.28% | 3.08% | 11.92% | |
73 Outperform | $10.20B | 20.96 | 14.13% | 2.11% | -1.55% | -7.26% | |
72 Outperform | $37.54B | 16.84 | 16.21% | 1.59% | 1.98% | 7.16% | |
69 Neutral | $9.61B | 21.54 | 12.80% | ― | 0.80% | 10.05% | |
68 Neutral | $5.22B | 31.02 | 8.97% | ― | 15.26% | 2.66% | |
57 Neutral | $20.97B | 10.32 | -14.01% | 2.49% | 4.46% | -23.38% | |
57 Neutral | $1.18B | 166.69 | 0.89% | ― | 2.06% | -91.82% |
* Technology Sector Average
Performance Comparison
DAVA
Endava
19.51
-18.17
-48.22%
DOX
Amdocs
90.95
2.26
2.55%
CTSH
Cognizant
76.50
5.86
8.30%
EPAM
Epam Systems
168.84
-103.21
-37.94%
INFY
Infosys
18.25
1.15
6.73%
GLOB
Globant SA
117.72
-83.98
-41.64%
Endava Earnings Call Summary
Earnings Call Date: Feb 20, 2025 | % Change Since: -36.05% | Next Earnings Date: May 27, 2025
Earnings Call Sentiment Neutral
The earnings call highlighted significant growth in North America and the banking and capital markets sector, driven by AI and core modernization initiatives. However, profitability challenges, regional softness, and declines in certain verticals like Payments and TMT are concerning. The sentiment reflects a balanced outlook with both positive strides in strategic areas and notable financial and macroeconomic headwinds.Highlights
Revenue Growth in North America
Revenue from North America grew 32.7% for the three months ended December 31st, 2024 over the same period last fiscal year, driven by the contribution of the GalaxE business.
Strong Performance in Banking and Capital Markets
The banking and capital markets industry vertical saw strong growth, up 43.6% over the past 12 months, with significant contributions from large core modernization projects.
Continued Focus on AI and Core Modernization
Endava is leveraging AI-enabled capabilities like Morpheus and Compass for client transformations, contributing to a solid pipeline of signed and potential opportunities.
Share Buyback Program
Endava announced its first share buyback program totaling $100 million, indicating a commitment to optimizing capital allocation.
Improved Client Satisfaction
Client satisfaction survey results showed 92% of clients are likely to recommend Endava, and 90% are likely to repurchase, indicating strong client relationships and service satisfaction.
Lowlights
Profit Decline
Profit before tax for the three months ended December 31st, 2024 was £2.5 million compared to £10.6 million in the same period in the prior year, indicating a significant decline.
Challenges in UK and Rest of World
Increased softness in the UK and rest of world regions due to a worsening macroeconomic environment, leading to increased client caution and unplanned ramp downs on existing projects.
Revenue Decline in Europe and Rest of World
Revenue from Europe declined 0.6%, and the rest of the world declined 43.5%, indicating challenges in these regions.
Weakness in Payments and TMT Vertical
Revenue in the payments vertical remains challenged with continued client spend reduction, and the TMT vertical is weakening due in part to project shutdowns.
Restructuring Charges
An exceptional charge of £5.5 million was incurred due to headcount reduction, reflecting ongoing cost optimization efforts.
Company Guidance
During the Endava Fiscal Year 2025 Q2 earnings call, the company provided several key metrics and guidance for the upcoming periods. For Q3 FY2025, Endava expects revenue between £198 million and £200 million, representing a 13% to 14% constant currency growth year-over-year. The full fiscal year 2025 is anticipated to generate revenue of £795 million to £800 million, equating to an 8.5% to 9% year-over-year increase. Adjusted diluted EPS for Q3 FY2025 is projected to be between £0.31 and £0.32, while the full year is expected to range from £1.20 to £1.23 per share. The company also highlighted strong growth in the banking and capital markets vertical, which rose 43.6% over the past 12 months, and announced a $100 million share buyback program. Furthermore, Endava reported a revenue of £195.6 million for the quarter ended December 31, 2024, a 6.6% increase from the prior year, with a profit before tax of £2.5 million. The company ended the quarter with 11,668 employees, a 1.1% increase from the previous year.Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.