Nagarro SELong
Nagarro SE (NA9): Small Cap Multi-Bagger in Germany.
Updated
Nagarro SE (NA9) is a global software engineering and digital transformation company. It provides services such as software development, cloud computing, data analytics, and user experience design to clients across various industries including retail, healthcare, finance, and manufacturing.
In terms of Nagarro SE's competitive advantages, some of the key factors that set the company apart from its competitors include:
Technical Expertise: Nagarro SE has a highly skilled and experienced team of software engineers, data scientists, and UX/UI designers who are proficient in cutting-edge technologies and frameworks. This technical expertise enables the company to deliver high-quality software solutions that are customized to meet the unique needs of its clients.
Agile Delivery: Nagarro SE follows an agile methodology for software development and delivery, which allows the company to quickly adapt to changing client requirements and market conditions. This approach enables the company to deliver projects faster and with a higher degree of flexibility and scalability.
Global Delivery Model: Nagarro SE has a global delivery model, which allows the company to tap into a diverse talent pool across different geographies. This model also enables the company to provide 24/7 support to its clients and reduce development costs by leveraging the cost arbitrage between different regions.
Client-Centric Approach: Nagarro SE puts a strong emphasis on understanding its clients' businesses and their unique challenges. This client-centric approach enables the company to provide customized solutions that address specific pain points and drive business outcomes for its clients.
Overall, Nagarro SE's technical expertise, agile delivery, global delivery model, and client-centric approach are key competitive advantages that differentiate the company from its competitors in the software engineering and digital transformation space.
As with any company, Nagarro faces various risks that could impact its business and financial performance. Some of the key risks that the company faces include:
Economic and Market Risks: Nagarro SE's business is dependent on the overall health of the global economy and the demand for software engineering and digital transformation services. A slowdown in economic activity or a downturn in the global market could reduce demand for the company's services and negatively impact its financial performance.
Competition: Nagarro SE operates in a highly competitive industry, and faces competition from both established players and new entrants. If the company is unable to compete effectively in terms of price, quality, and innovation, it could lose market share and revenue.
Dependence on Key Clients: Nagarro SE's revenue is concentrated among a few key clients, which increases the risk of revenue volatility if these clients reduce their spending on the company's services, or if the company is unable to secure new clients to replace lost business.
Talent Retention: Nagarro SE's success depends on its ability to attract, retain, and develop top talent in a highly competitive labor market. If the company is unable to attract and retain top talent, it may not be able to deliver high-quality services and meet its clients' needs.
Technological Risks: Nagarro SE operates in a rapidly evolving technology landscape, which requires the company to invest continually in research and development to stay ahead of the curve. If the company is unable to adapt to new technologies or fails to innovate, it could lose market share to competitors that offer more advanced solutions.
Return On Capital Employed (ROCE)
Nagarro has a ROCE of 20%. In absolute terms that's a great return and it's even better than the IT industry average of 15%.
To sum it up, Nagarro has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Given the stock has declined 55% from its highs, this could be a good investment if the valuation and other metrics are also appealing. With that in mind, I believe that the promising trends warrant this stock for further investigation.
In terms of Nagarro SE's competitive advantages, some of the key factors that set the company apart from its competitors include:
Technical Expertise: Nagarro SE has a highly skilled and experienced team of software engineers, data scientists, and UX/UI designers who are proficient in cutting-edge technologies and frameworks. This technical expertise enables the company to deliver high-quality software solutions that are customized to meet the unique needs of its clients.
Agile Delivery: Nagarro SE follows an agile methodology for software development and delivery, which allows the company to quickly adapt to changing client requirements and market conditions. This approach enables the company to deliver projects faster and with a higher degree of flexibility and scalability.
Global Delivery Model: Nagarro SE has a global delivery model, which allows the company to tap into a diverse talent pool across different geographies. This model also enables the company to provide 24/7 support to its clients and reduce development costs by leveraging the cost arbitrage between different regions.
Client-Centric Approach: Nagarro SE puts a strong emphasis on understanding its clients' businesses and their unique challenges. This client-centric approach enables the company to provide customized solutions that address specific pain points and drive business outcomes for its clients.
Overall, Nagarro SE's technical expertise, agile delivery, global delivery model, and client-centric approach are key competitive advantages that differentiate the company from its competitors in the software engineering and digital transformation space.
As with any company, Nagarro faces various risks that could impact its business and financial performance. Some of the key risks that the company faces include:
Economic and Market Risks: Nagarro SE's business is dependent on the overall health of the global economy and the demand for software engineering and digital transformation services. A slowdown in economic activity or a downturn in the global market could reduce demand for the company's services and negatively impact its financial performance.
Competition: Nagarro SE operates in a highly competitive industry, and faces competition from both established players and new entrants. If the company is unable to compete effectively in terms of price, quality, and innovation, it could lose market share and revenue.
Dependence on Key Clients: Nagarro SE's revenue is concentrated among a few key clients, which increases the risk of revenue volatility if these clients reduce their spending on the company's services, or if the company is unable to secure new clients to replace lost business.
Talent Retention: Nagarro SE's success depends on its ability to attract, retain, and develop top talent in a highly competitive labor market. If the company is unable to attract and retain top talent, it may not be able to deliver high-quality services and meet its clients' needs.
Technological Risks: Nagarro SE operates in a rapidly evolving technology landscape, which requires the company to invest continually in research and development to stay ahead of the curve. If the company is unable to adapt to new technologies or fails to innovate, it could lose market share to competitors that offer more advanced solutions.
Return On Capital Employed (ROCE)
Nagarro has a ROCE of 20%. In absolute terms that's a great return and it's even better than the IT industry average of 15%.
To sum it up, Nagarro has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Given the stock has declined 55% from its highs, this could be a good investment if the valuation and other metrics are also appealing. With that in mind, I believe that the promising trends warrant this stock for further investigation.
Note
NAGARRO SE (NA9) - Apr 14, 2023RELEASES AUDITED FINANCIAL RESULTS FOR 2022, ANNOUNCES SHARE BUYBACK OF 30M EUR, FROM APRIL 2022 TO OCTOBER 2022
REVENUE WAS EUR 231.0 MILLION IN Q4 2022, UP 42.5% YOY FROM EUR 162.0 MILLION IN Q4 2021
FY 2022 REVENUE WAS EUR 856.3 MILLION, IMPLYING A YOY REVENUE GROWTH OF 56.8%
OPERATING CASH FLOW IN Q4 2022 ROSE TO EUR 36.8 MILLION FROM EUR 22.9 MILLION IN Q4 2021, AND FROM EUR 30.5 MILLION IN Q3 2022
GROSS MARGIN INCREASED FROM 28.3% IN 2021 TO 28.9% IN 2022
ADJUSTED EBITDA GREW 86.3% FROM EUR 79.7 MILLION (14.6% OF REVENUE) IN 2021 TO EUR 148.5 MILLION (17.3% OF REVENUE) IN 2022
EBITDA INCREASED BY EUR 75.3 MILLION FROM EUR 70.3 MILLION IN 2021 TO EUR 145.6 MILLION IN 2022
EBIT INCREASED BY EUR 66.7 MILLION FROM EUR 45.7 MILLION IN 2021 TO EUR 112.4 MILLION IN 2022
NET PROFIT INCREASED BY EUR 47.3 MILLION TO EUR 77.3 MILLION IN 2022 AGAINST EUR 30.0 MILLION IN 2021
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