EPAM – Market expectations are for Uniform ROA to reach new peaks, but management may have concerns about growth, capital allocation, and the pandemic

January 12, 2021

  • EPAM Systems, Inc. (EPAM:USA) currently trades at a historical high relative to UAFRS-based (Uniform) earnings, with a 46.1x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management may have concerns about revenue growth, their capital allocation strategy, and the impact of the pandemic
  • Specifically, management may lack confidence in their ability to sustain revenue growth, mitigate gross margin declines, and continue improving their cash collection. Furthermore, they may have concerns about the coronavirus’s impact on the industry and on projects. Moreover, management may be exaggerating their focus on cross-sell clients and the progress of the health information technology project. Finally, they may be concerned about their capital allocation strategy and the potential of key investments