Resources

EPAM – Market expectations are for Uniform ROA to improve, but management may have concerns about revenues, employee utilization, and SG&A

September 23, 2020

  • EPAM Systems, Inc. (EPAM:USA) currently trades at a historical high relative to UAFRS-based (Uniform) earnings, with a 43.8x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management may have concerns about revenue growth, the current employee utilization rate, and SG&A margin guidance

  • Specifically, management may lack confidence in their ability to grow revenues from their top 20 customers, sustain Life Sciences and Health Care revenue growth, and help clients in application development and enhancement. In addition, they may have concerns about continued softness in the labor market, the impact of
    coronavirus-related customer concessions and about how the current situation is changing the way clients do business. Moreover, management may lack confidence in their ability to maintain the current employee utilization rate, meet their SG&A margin guidance, and sustain reduced SG&A costs from lower travel and marketing events. Finally, they may be exaggerating project acceleration across different clients