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EPAM entered an agreement on November 9 to buy back $500 million of its stock. This is part of a larger $1.8 billion buyback plan the board approved in September. Under the deal, EPAM pays the cash upfront and receives an initial batch of about 2.5 million shares immediately, with the final count settled by early 2027 based on the stock's average price.
A buyback is when a company uses its cash to buy its own shares, which reduces the total number of shares available and makes each remaining share own a larger piece of the business. By using an "accelerated" deal, EPAM is moving quickly to put its cash to work. This move supports our view that the company is shifting from just growing its staff to returning significant value to its owners.
Source: 8-K filing
After EPAM Systems reported its November results, we cut our quality score to 3.6 after lowering our ratings for sales growth and remaining market opportunity. We updated our projections for revenue and profit margins over the next year. We added the lack of revenue from new acquisitions and the impact of activist investor pressure on share buybacks to what we track. We have also started monitoring how much cash management returns to shareholders compared to its total cash flow.
Guggenheim established a $190 price target for the software engineering firm, suggesting they see significant room for the stock to rise from its current level of about $157. This call is notably more optimistic than the broader group of analysts, whose average target sits much lower at $119.
The move follows a week where the company reported better-than-expected earnings and announced a plan to buy back $1.5 billion of its own shares. While one analyst's target is just an estimate, this high valuation reflects growing confidence that the company's shift toward high-end AI projects is beginning to pay off.
Source: Guggenheim
EPAM earned $3.51 per share this quarter, topping the $3.41 analysts expected. Revenue grew about 2 percent to $1.43 billion as the company continues its recovery from the workforce disruptions caused by the war in Ukraine. Profit margins also improved, which shows the company is successfully managing its costs while shifting its engineering talent to new global hubs.
Management is using its strong cash position to reward owners, adding $1.5 billion to its share buyback program. It also plans to return at least half of its free cash flow, the cash left over after paying for operations, to shareholders every year through 2029. The stock rose about 17 percent on the news, a sharp move that suggests the market is gaining confidence in the company's long-term growth and its ability to help clients build new AI tools.
See the full quarter, and how our tracked metrics did
Source: 8-K filing
EPAM Systems is scheduled to report its latest quarterly earnings on November 5. Analysts are looking for about 1.42 billion dollars in revenue and 3.41 dollars in profit per share. This update will be an important check on whether the company is successfully helping its large clients move from just talking about artificial intelligence to actually building it. We will be watching to see if profit margins remain steady as the company continues to manage its global workforce.
Management consistently sets a bar they can clear, beating profit estimates for eight straight quarters. This reliable execution shows they have a firm grip on their costs even as sales growth remains modest.
| Expectation | |
|---|---|
| EPS | $3.52 |
| Revenue | $1.41B |
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