Up to 500% returns in 5 years! Brokerages see 31% upside potential in this multibagger stock

Shares of Persistent Systems have delivered a multibagger return to its  shareholders. The midcap stock has delivered a nearly 500 percent return to its investors in the last five years. The stock has hit a 52-week high of Rs 5,131.15 on February 21, 2023, and a 52-week low of Rs 3,091.65 on September 26, 2022.

Shares of Persistent Systems were trading 0.042 percent higher at Rs 4,474.10 apiece in Wednesday's trade.

However, brokerages continue to maintain their bullish stance and see over 30 percent upside after the Pune-headquartered company's fourth-quarter performance was broadly in line with revenue.

The company's performance was driven by the T1 account offset by a decline in IP-led revenue and project rampdown of hyper-scaler client.

EBIT margin was flat QoQ at 15.4 percent, broadly in-line with our estimates of 15.5 percent owing to higher project related travel expenses, royalty and SGA expenses.

Domestic brokerage HDFC Securities maintains a 'Buy' recommendation on Persistent Systems as its top pick in mid-tier IT based on strong order booking (highest new deals), consistency in large deal wins and increased deal participation with the company crossing $1 billion threshold providing growth visibility; improved client mining/crosssell/annuity reflected in revenue/client in services (1.6x in last two years as compared to flat over FY15-21) and $5 million+ client count up 3x in three years, supported by leveraging partnerships and recent acquisitions; and scope for margin expansion supported by utilisation and efficiencies, SG&A leverage, and T1 growth rebound.

The brokerage has a target price of Rs 5,880, valuing Persistent Systems at 32 times Dec-24E EPS, supported by 25 percent EPS CAGR over FY23-25E.

Given the company’s strong growth potential backed by robust deal wins and superior execution capabilities, Axis Securities maintains a 'Buy' rating on the stock with a target price of Rs 4,920 per share.

Meanwhile, brokerage Sharekhan believes Persistent Systems is well-placed to navigate the near-term uncertain environment owing to its ability to deliver industry-leading revenue growth on account of broad-based demand across verticals, robust order intake and new logo additions.

"Hence, we maintain a Buy rating on Persistent Systems with unchanged PT of Rs 5,010. At the CMP the stock trades at 29.5 times its FY2024E EPS and 25.1 times its FY2025E EPS," the note stated.