Critical Analysis: Amdocs (NASDAQ:DOX) & Infosys (INFY)

Amdocs (NASDAQ: DOX) and Infosys (NYSE:INFY) are both mid-cap computer and technology companies, but which is the superior business? We will compare the two businesses based on the strength of their profitability, institutional ownership, earnings, valuation, dividends, analyst recommendations and risk.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Amdocs and Infosys, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Amdocs 0 4 2 0 2.33
Infosys 2 8 2 0 2.00

Amdocs currently has a consensus price target of $70.17, suggesting a potential upside of 8.50%. Infosys has a consensus price target of $15.06, suggesting a potential downside of 5.20%. Given Amdocs’ stronger consensus rating and higher possible upside, equities analysts plainly believe Amdocs is more favorable than Infosys.

Valuation and Earnings

This table compares Amdocs and Infosys’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Amdocs $3.87 billion 2.43 $436.82 million $2.96 21.85
Infosys $10.21 billion 3.56 $2.14 billion $0.97 16.38

Infosys has higher revenue and earnings than Amdocs. Infosys is trading at a lower price-to-earnings ratio than Amdocs, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Amdocs and Infosys’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Amdocs 11.30% 14.77% 9.81%
Infosys 21.04% 21.05% 17.17%

Risk and Volatility

Amdocs has a beta of 0.52, meaning that its share price is 48% less volatile than the S&P 500. Comparatively, Infosys has a beta of 0.69, meaning that its share price is 31% less volatile than the S&P 500.

Institutional & Insider Ownership

93.3% of Amdocs shares are held by institutional investors. Comparatively, 19.0% of Infosys shares are held by institutional investors. 15.4% of Amdocs shares are held by company insiders. Comparatively, 22.4% of Infosys shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Dividends

Amdocs pays an annual dividend of $0.88 per share and has a dividend yield of 1.4%. Infosys pays an annual dividend of $0.39 per share and has a dividend yield of 2.5%. Amdocs pays out 29.7% of its earnings in the form of a dividend. Infosys pays out 40.2% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Infosys has increased its dividend for 4 consecutive years. Infosys is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Infosys beats Amdocs on 10 of the 16 factors compared between the two stocks.

Amdocs Company Profile

Amdocs Limited is a provider of software and services for communications, entertainment and media industry service providers. The Company develops, implements and manages software and services associated with business support systems (BSS), operational support systems (OSS) and network operations to enable service providers to introduce new products and services, process orders, monetize data, support new business models and enhance their understanding of their customers. The Company’s segment provides software products and services. Its services include strategic business consulting, systems integration and transformation, managed services and testing. Its managed services provide multi-year, flexible and tailored business processes and applications services, including application development and maintenance, information technology (IT) and infrastructure services, testing and professional services.

Infosys Company Profile

Infosys Limited is engaged in consulting, technology, outsourcing and next-generation services. The Company, along with its subsidiaries, provides business information technology services comprising application development and maintenance, independent validation, infrastructure management, engineering services comprising product engineering and life cycle solutions and business process management; consulting and systems integration services comprising consulting, enterprise solutions, systems integration and advanced technologies; products, business platforms and solutions to accelerate intellectual property-led innovation, including Finacle, its banking solution, and offerings in the areas of Analytics, Cloud and Digital Transformation. Its segments are Financial Services and Insurance (FSI), Manufacturing and Hi-tech (MFG & Hi-TECH), Energy & utilities, Communication and Services (ECS), Retail, Consumer packaged goods and Logistics (RCL), and Life Sciences and Healthcare (LSH).

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