Is Wipro Undervalued Or Overvalued

Wipro is a multinational company with a strong presence across the globe. Though it started as a vegetable oil manufacturer, Wipro has walked a long way to mark its foothold in different sectors including IT, analytics, consulting, electronics, R&D services, etc.

This article will throw an insight into whether this craze is worth it. Coupling with the recent data for 2024, a detailed discussion is given about the real value of Wipro.

About Wipro Ltd

Wipro Ltd is one of the leading tech companies in India. This multinational corporation has invested in computer security, artificial intelligence, cloud computing, digital transformation, data analytics, robotics, and other technology consulting services. 

Wipro Ltd was set up on 29th December 1945 as a manufacturer of cooking oils. Later in the 1980s, it started to spread business in computer hardware and software and manufacturing personal computers.

In almost 80 years Wipro has added feathers to its crown of fame. In February 2024, Wipro acquired 60% of the US Insurtech firm Aggne Global Inc. for $66 million. Previously in 2021, Wipro acquired a famous global consultancy Capco, and Ampion. Wipro’s steps helped the company get a robust strong hold in the IT sector and make greater profit.

Recent Stock Price of Wipro:

Stock price matters a lot to evaluate if a stock is undervalued or overvalued. In June 2024, Wipro share price surged to 30%. Before June this type of strike had hit an all-time high price of ₹739 on Oct 14, 2021. Though the traders are considering a target of ₹600 for Wipro, On July 16th, 2024 Wipro again hit ₹559 before the market’s closing.

Let’s have a look at the ups and downs of Wipro this year from the data of Nifty 50.

Understanding Wipro Valuation

Now comes the main part – is Wipro undervalued or overvalued? If you want to understand the actual value of Wipro, you have to look at different statistics including the price-to-book (P/B) ratio, Price Earnings (P/E) Ratio,  Discounted Cash Flow(DCF).

Is Wipro Overvalued According to the P/E Ratio:

The P/E ratio shows if the investors are paying a comparatively high price for the respective company’s earnings. A higher P/E ratio points towards overvaluation and high growth expectations of the company.

Wipro’s recent performance doesn’t completely justify the premium valuation as its current P/E Ratio is higher than average. Recently in July, Wipro’s P/E ratio was 24.41% on average against the sector PE of 37.06%. This means at an industry level, it is not overvalued.

Is Wipro Overvalued according to the P/B Ratio:

The P/B ratio above one indicates that the company is overvalued.

While considering the real value of Wipro we have to look at the current P/B ratio of the company. In recent times Wipro its P/B ratio has been 3.69 which indicates that Wipro’s P/B points towards overvaluation.

Is Wipro Overvalued according to DCF Value:

DCF value is a method to estimate the intrinsic value of a stock which is based on expected future cash flows. This model values the stock by predicting future cash flows and discounting them back to the present value.

According to this standard, if we want to measure the value of Wipro, then the Current DCF value of Wipro is ₹311.60. This value indicates that the market is currently placing a 36% premium on the stock of Wipro as per the valuation metrics of DCF.

Conclusion

Wipro is a leading IT company in India and at a global level. However, before investing in stocks check if they match your goals and risk appetite. Also, use the analysis above to find if a stock is undervalued or overvalued to make an informed decision.