Baird has affirmed a positive stance on WNS Limited (NYSE: NYSE:WNS), reiterating an Outperform rating with a $66.00 price target.
The firm's outlook on the company remains optimistic, citing several factors that contribute to the perceived value of WNS shares.
The analyst at Baird believes that WNS is undervalued and has a favorable view of the stock, despite acknowledging investor concerns regarding the company's performance in the second half of the year.
The expectation is that WNS will report second-quarter revenues in line with market estimates and earnings per share slightly above expectations. This projection is based on the assumption that the market's implied decremental margins are overly pessimistic.
The firm also points out that incremental share buybacks should have a positive impact. Baird's confidence in WNS is bolstered by four key factors: the initiation of index inclusion, significant share buybacks supported by a strong balance sheet, a forecasted acceleration towards high single-digit growth in fiscal year 2026 due to more favorable comparisons in the first and second quarters of that year, and an attractive valuation of approximately 10 times the calendar year 2025 price-to-earnings ratio.
In other recent news, WNS (Holdings) Limited reported a decrease in Q1 revenue and profit for fiscal 2025, registering figures at $323.1 million and $28.9 million, respectively. Despite this, WNS managed to sign eight new clients and expand relations with 36 existing ones.
The company revised its fiscal 2025 guidance, anticipating constant currency growth of 0-5% year-over-year, and increased its earnings per share (EPS) guidance, reflecting an acceleration of share buyback activities.
WNS also announced the integration of its Unified Analytics Platform (UAP) with Amazon (NASDAQ:AMZN) Bedrock, a move that enhances its generative artificial intelligence offerings for enterprises. The company further updated its Code of Business Ethics and Conduct, with no waivers granted to the existing code.
In analyst actions, Needham maintained a Buy rating on WNS and increased the price target to $70.00. However, JPMorgan and Deutsche Bank downgraded WNS due to concerns about the company's ability to meet its fiscal 2025 guidance.
InvestingPro Insights
Recent data from InvestingPro provides additional context to Baird's optimistic outlook on WNS Limited. The company's market capitalization stands at $2.37 billion, with a P/E ratio of 21.28. This valuation aligns with Baird's view that WNS shares may be undervalued, especially considering the forward-looking P/E ratio (adjusted) of 15.24 for the last twelve months as of Q1 2025.
InvestingPro Tips highlight that management has been aggressively buying back shares, which corroborates Baird's point about significant share buybacks supported by a strong balance sheet. This strategy could potentially boost shareholder value and earnings per share.
Another InvestingPro Tip indicates that WNS operates with a moderate level of debt, which supports the company's financial flexibility to pursue growth initiatives and continue share repurchases. This aligns with Baird's confidence in WNS's financial position.
For investors seeking a more comprehensive analysis, InvestingPro offers 8 additional tips for WNS, providing a deeper understanding of the company's financial health and market position.
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