Buy Signal on CapGemini (CAP-FR)
Capgemini has a rather strong track record with a behavorial score of 9/10, therefore we consider the signal as a long term one.
Capgemini is a € 33 Bn market cap, and a major European IT Services company based in Paris. The company is active in consulting, digital transformation, technology and engineering services. Capgemini acquired Altran Technology the world leader in R&D outsourcing in 2020, and the overall business mixed is now heading heavily toward operation and engineering services (33% of Group revenues) while applications and Technology contribution decreasing in proportion.
Capgemini is a growth story that developed by acquisitions and also organic growth. Operating margins are growing steadily and reached a record high in 2021 at 12.9%. In 2022, Capgemini is expected to grow revenues by 10% coupled with flat margins. Margins are expected to grow again from 2023,heading towards 15% mid term. EPS growth are expected to grow by double digit in the next 3 years.
IT Services are growing according to GDP growth, but are also boosted by technology needs, and new megatrends such as digitization ad transformation. Inflation issues are mainly focuses on engineers wages, that are in constant pressure, a context that will no be so much worsen by the Russian crisis. Therefore big IT Services company looks like a safe haven in such an environment with increasing risks due to inflation and the supply chain.
Short term catalyst: Safe haven due to structural growth and low exposure to inflation/Russia.
This signal is consistent with the major bullish trend in the European IT Services sector. There is currently 56% of European IT Services stocks in bullish tactical signal and 52% in bullish strategic signal.