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Epam Systems Inc (EPAM)
NYSE:EPAM
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Epam Systems
(NYSE:EPAM)
Rating:74Outperform
Price Target:
$206.00
▲( 17.08% Upside)
Positive Factors
Earnings
EPAM's results exceeded expectations due to better organic growth trends as demand among most clients improved.
Financial Performance
Strong 1Q results and positive bookings momentum encouraged management to raise the CY25 organic growth outlook.
Leadership
EPAM announced a leadership change with Balazs Fejes becoming CEO, which is seen as a positive development.
Negative Factors
Booking Acceleration
Poor bookings acceleration and tariff impact could push management to cut from the top-end of the CY25 outlook.
Spending Headwinds
Tariff-related spending headwinds could negatively impact the Travel & Consumer vertical, which has yet to show signs of stabilization.
Tariff Uncertainty
Structural questions persist, including near-term risks that could drive worsening client spend if tariff uncertainty is not resolved soon.
Epam Systems (EPAM) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$9.97B
Dividend YieldN/A
Average Volume (3M)758.91K
Price to Earnings (P/E)24.6
Beta (1Y)1.14
Revenue Growth4.72%
EPS Growth-3.06%
CountryUS
Employees61,200
SectorTechnology
Sector Strength76
IndustryInformation Technology Services
Share Statistics
EPS (TTM)2.41
Shares Outstanding56,652,702
10 Day Avg. Volume877,405
30 Day Avg. Volume758,914
Financial Highlights & Ratios
PEG Ratio10.76
Price to Book (P/B)2.77
Price to Sales (P/S)0.00
P/FCF Ratio19.03
Enterprise Value/Market Cap0.89
Enterprise Value/Revenue0.48
Enterprise Value/Gross Profit6.35
Enterprise Value/Ebitda3.44
Forecast
1Y Price Target
$214.31Price Target Upside21.80% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering14
Epam Systems Business Overview & Revenue Model
Company DescriptionEPAM Systems, Inc. provides digital platform engineering and software development services worldwide. The company offers engineering services, including requirements analysis and platform selection, customization, cross-platform migration, implementation, and integration; infrastructure management services, such as software development, testing, and maintenance with private, public, and mobile infrastructures for application, database, network, server, storage, and systems operations management, as well as monitoring, incident notification, and resolution services; and maintenance and support services. It also provides operation solutions comprising integrated engineering practices and smart automation; and optimization solutions that include software application testing, test management, automation, and consulting services to enable customers enhance their existing software testing and quality assurance practices, as well as other testing services that identify threats and close loopholes to protect its customers' business systems from information loss. In addition, the company offers business, experience, technology, data, and technical advisory consulting services; and digital and service design solutions, which comprise strategy, design, creative, and program management services, as well as physical product development, such as artificial intelligence, robotics, and virtual reality. It serves the financial services, travel and consumer, software and hi-tech, business information and media, life sciences and healthcare, and other industries. The company was founded in 1993 and is headquartered in Newtown, Pennsylvania.
How the Company Makes MoneyEPAM Systems generates revenue primarily through offering software engineering, product development, and digital platform services to its clients. The company utilizes a global delivery model, combining onshore and offshore resources to provide cost-effective solutions. Revenue streams are largely driven by long-term contracts with a diverse range of clients across multiple sectors, ensuring stability and growth. EPAM's client engagements often involve custom software development, consulting, and integration services, as well as ongoing support and maintenance. Significant partnerships with major technology providers also enhance EPAM's service offerings, allowing the company to leverage the latest technological advancements and expand its capabilities.
Epam Systems Financial Statement Overview
Summary
Epam Systems demonstrates strong financial health with consistent revenue growth, robust profitability margins, and a stable balance sheet characterized by low leverage. The company's cash flow generation is strong, supporting ongoing operations and future investments.Income Statement
Epam Systems has shown consistent revenue growth over the years, with a recent increase from $4,690.54 million to $4,727.94 million, resulting in a modest revenue growth rate of 0.8%. The company maintains strong profitability with a gross profit margin of 30.7% and a net profit margin of 9.6%. EBIT and EBITDA margins are also healthy at 11.5% and 14.3%, respectively. The company's ability to sustain profitability and growth in revenue indicates a solid performance in the software industry.85
Very Positive
Balance Sheet
Epam Systems exhibits a strong balance sheet with a low debt-to-equity ratio of 0.045, indicating minimal leverage. The equity ratio is robust at 76.4%, signifying strong capitalization and low financial risk. Return on equity (ROE) stands at 12.5%, reflecting efficient use of equity to generate profits. Overall, the company shows financial stability and low risk, supported by high equity levels and minimal debt.88
Very Positive
Cash Flow
Epam Systems maintains a strong cash flow position with an operating cash flow to net income ratio of 1.23, demonstrating efficient cash generation relative to earnings. The free cash flow to net income ratio is also strong at 1.16. Despite a slight decline in free cash flow from $534.22 million to $527.02 million, the company's cash flow generation capabilities remain strong, supporting ongoing operations and growth opportunities.83
Very Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 4.73B | 4.69B | 4.82B | 3.76B | 2.66B | Gross Profit |
| 1.45B | 1.32B | 1.54B | 1.27B | 926.96M | EBIT |
| 544.58M | 501.24M | 572.97M | 542.32M | 379.32M | EBITDA |
| 673.97M | 669.29M | 713.01M | 616.79M | 508.57M | Net Income Common Stockholders |
| 454.53M | 417.08M | 419.42M | 481.65M | 327.16M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 1.29B | 2.10B | 1.74B | 1.45B | 1.38B | Total Assets |
| 4.75B | 4.35B | 4.01B | 3.52B | 2.72B | Total Debt |
| 163.25M | 171.94M | 193.22M | 239.16M | 266.40M | Net Debt |
| -1.12B | -1.86B | -1.49B | -1.21B | -1.06B | Total Liabilities |
| 1.12B | 880.89M | 1.01B | 1.03B | 738.31M | Stockholders Equity |
| 3.63B | 3.47B | 3.00B | 2.49B | 1.98B |
| Cash Flow | Free Cash Flow | |||
| 527.02M | 534.22M | 382.48M | 460.83M | 475.61M | Operating Cash Flow |
| 559.17M | 562.63M | 464.10M | 572.33M | 544.41M | Investing Cash Flow |
| -884.98M | -66.77M | -182.93M | -368.92M | -167.15M | Financing Cash Flow |
| -390.41M | -165.77M | -2.02M | -59.56M | -765.00K |
Epam Systems Technical Analysis
Negative
175.95
Price Trends
166.58
Positive
199.03
Negative
206.33
Negative
Market Momentum
5.06
Negative
52.77
Neutral
34.20
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For EPAM, the sentiment is Negative. The current price of 175.95 is above the 20-day moving average (MA) of 173.17, above the 50-day MA of 166.58, and below the 200-day MA of 206.33, indicating a neutral trend. The MACD of 5.06 indicates Negative momentum. The RSI at 52.77 is Neutral, neither overbought nor oversold. The STOCH value of 34.20 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for EPAM.
Epam Systems Risk Analysis
Epam Systems disclosed 35 risk factors in its most recent earnings report. Epam Systems reported the most risks in the “Tech & Innovation” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 1 New Risks
1.
The invasion of Ukraine and the resulting war has had and could continue to have a material adverse effect on our personnel, business, and finances. Q4, 2024
Epam Systems Peers Comparison
Overall Rating
UnderperformOutperform
Sector (61)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
78 Outperform | $7.42B | 34.43 | 23.81% | ― | 14.18% | 21.49% | |
76 Outperform | $7.61B | 14.81 | 22.21% | 1.44% | 7.31% | -15.86% | |
76 Outperform | $10.15B | 21.78 | 13.48% | ― | 14.16% | 22.25% | |
75 Outperform | $2.68B | 14.88 | 21.21% | ― | -0.64% | 30.96% | |
74 Outperform | $9.97B | 24.60 | 11.57% | ― | 4.72% | -3.06% | |
66 Neutral | $4.43B | 29.00 | 7.97% | ― | 11.90% | -11.15% | |
61 Neutral | $11.29B | 10.07 | -7.05% | 2.96% | 7.47% | -10.75% |
* Technology Sector Average
Performance Comparison
EPAM
Epam Systems
175.95
-1.32
-0.74%
CACI
Caci International
461.62
38.51
9.10%
EXLS
Exlservice Holdings
45.58
15.35
50.78%
G
Genpact
43.51
10.77
32.90%
WNS
WNS
57.79
6.33
12.30%
GLOB
Globant SA
100.62
-64.15
-38.93%
Epam Systems Earnings Call Summary
Earnings Call Date:May 08, 2025
(Q1-2025)
| % Change Since: 10.51%|
Next Earnings Date:Jul 31, 2025
Earnings Call Sentiment Neutral
EPAM Systems reported strong Q1 results with significant revenue growth and AI-driven momentum, despite a challenging macroeconomic environment. The company also announced a strategic leadership transition and continued geographic expansion. However, there were challenges with decreased free cash flow, declining gross margins, and specific industry verticals facing headwinds. While the positive aspects highlight growth and strategic initiatives, the financial challenges temper the overall optimism.Q1-2025 Updates
Positive Updates
Strong Q1 Revenue Growth
EPAM generated revenue of $1.3 billion in Q1, a year-over-year increase of 11.7% on a reported basis. Organic constant currency revenue grew 1.4% compared to Q1 2024, exceeding expectations of flat organic growth.
AI-Driven Momentum
AI native revenues grew strong double-digit quarter-over-quarter, driven by increased client demand for AI capabilities. EPAM is engaged in a wide range of AI initiatives with the vast majority of its top 100 clients.
Leadership Transition Announced
Arkadiy Dobkin announced his planned transition to Executive Chairman, with Balazs Fejes set to become CEO and President on September 1, 2025.
Geographic Expansion and Talent Growth
EPAM saw an increase in net organic headcount across India, Europe, and Western Central Asia, with strong demand in these regions. The total headcount grew by 18.2% year-over-year.
Recognition and Partnerships
EPAM was named Google 2025 Partner of the Year for Oil and Gas, reflecting strong collaborations and innovations in AI-powered solutions.
Negative Updates
Decreased Free Cash Flow
Free cash flow was $15 million compared to $123 million in the same quarter last year, impacted by higher bonus payments and increased DSO due to fixed fee revenues.
Gross Margin Decline
GAAP gross margin for Q1 was 26.9%, down from 28.4% in Q1 2024. Non-GAAP gross margin also decreased due to compensation increases and lower profitability from acquisitions.
Challenges in Consumer and Telecom Verticals
Generic goods, retail, and travel decreased 1.4% year-over-year, and emerging verticals organic revenue in constant currency contracted by 3.5%, negatively impacted by softness across manufacturing and telecom clients.
High DSO Levels
DSO was 75 days at the end of Q1, up from 70 days in Q4 2024, resulting from an increasing share of fixed fee revenues with associated milestone billing.
Company Guidance
During EPAM Systems' Q1 2025 earnings call, the company reported a strong performance despite challenging macroeconomic conditions, with revenue reaching $1.3 billion, marking an 11.7% year-over-year increase. Organic constant currency revenue grew by 1.4%, surpassing expectations of flat growth. The company experienced double-digit revenue growth in four of its six verticals, with financial services seeing a 29.3% increase year-over-year. The Americas region, representing 60% of revenues, also grew by 12.6% year-over-year. EPAM's focus on AI-related capabilities resulted in strong double-digit quarter-over-quarter growth in AI native revenues. The company also announced a leadership transition, with Balazs Fejes set to become CEO on September 1, 2025. Looking forward, EPAM raised its full-year revenue growth guidance to 11.5%-14.5%, with an inorganic contribution of about 9%, and expects organic constant currency growth between 2%-5%.Epam Systems Corporate Events
Executive/Board ChangesBusiness Operations and StrategyFinancial Disclosures
EPAM Systems Announces Leadership Transition with New CEO
Positive
May 8, 2025
On May 8, 2025, EPAM Systems announced a leadership transition with CEO Arkadiy Dobkin moving to Executive Chairman and Balazs Fejes stepping in as CEO and President effective September 1, 2025. The company reported strong first-quarter 2025 results with revenues of $1.302 billion, an 11.7% increase year-over-year, and raised its full-year revenue growth outlook to 11.5% to 14.5%. Despite a decrease in GAAP income from operations and diluted EPS, EPAM highlighted its unique differentiation in supporting client transformations amidst a dynamic macroeconomic landscape.
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.