EXLS Stock Study (11-12-25)

I recently studied ExlService Holdings, Inc. (EXLS, $39.57). The previous study is here.

M* writes:

     > ExlService Holdings Inc. is a business process management company
     > that provides digital operations and analytical services to clients
     > driving enterprise-scale business transformation initiatives that
     > leverage company’s deep expertise in analytics, AI, ML and cloud.
     > The company offers business process outsourcing and automation
     > services, and data-driven insights to customers across multiple
     > industries. The company operates through four segments based on
     > the products and services offered and markets served: Insurance,
     > Healthcare, Emerging, Analytics. The vast majority of the company’s
     > revenue is earned in the United States, and more than half of its
     > revenue comes from Analytics segment.

Over the past decade, the medium-size company has grown sales and EPS at annualized rates of 12.5% and 18.8%, respectively. Lines are mostly up, straight, and parallel except for a sales dip in ’20 and EPS dip in ’17. Value Line (VL) gives an Earnings Predictability score of 90.

Over the past decade, PTPM leads peer and industry averages while ranging from 6.8% in ’18 to 14.6% in ’23 with a last-5-year mean of 13.5%. ROE trails peer and industry averages despite increasing from 11.2% (’15) to 21.6% (’24) with a last-5-year mean of 18.3%. Debt-to-Capital is lower than peer and industry averages despite increasing from 13.2% (’15) to 28.2% (’24) with a last-5-year mean of 29.2%.

Quick Ratio is 2.57 and Interest Coverage 17.8 per M* who assigns “Wide” Economic Moat and gives an A grade for Financial Health (per BI website). VL gives a B++ grade for Financial Strength.

With regard to sales growth:

• YF projects YOY 13.0% and 11.3% for ’25 and ’26, respectively (based on 9 analysts).
• Zacks projects YOY 13.0% and 11.4% for ’25 and ’26, respectively (4 analysts).
• VL projects 9.2% annualized growth from ’24-’29.
• CFRA reports ACE of 13.1% YOY and 12.2% per year for ’25 and ’24-’26, respectively (9).
• M* offers a 2-year annualized ACE of 12.5%.

I am forecasting below the range at 9.0% per year.

With regard to EPS growth:

• MarketWatch projects 15.9% and 15.6% per year for ’24-’26 and ’24-’27, respectively (based on 10 analysts).
• Nasdaq.com projects 16.3% YOY and 16.0% per year for ’26 and ’25-’27 (5 / 5 / 2 analysts for ’25 / ’26 / ’27).
• Seeking Alpha projects 4-year annualized growth of 13.9%.
• Finviz gives ACE 5-year annualized growth of 15.1% (3).
• LSEG estimates LTG at 14.0%.
• YF projects YOY 16.2% and 14.3% for ’25 and ’26, respectively (9).
• Zacks projects YOY 16.4% and 14.1% for ’25 and ’26, respectively (6), along with 5-year annualized growth of 13.9%.
• VL projects annualized growth of 13.7% from ’24-’29.
• CFRA gives ACE 58.7% YOY and 34.5%/year for ’25 and ’24-’26 [(9); also unique to project this spike previously].
• M* projects long-term annualized growth of 15.0%.

My 12.0% per year forecast is below the long-term-estimate range (mean of six: 14.3%). Initial value is ’24 EPS of $1.21/share rather than 2025 Q3 $1.47 (TTM).

My Forecast High P/E is 30.0. Over the past 10 years, high P/E ranges from 30.6 in ’16 to 45.6 in ’17 with a last-5-year mean of 38.9 and a last-5-year-mean average P/E of 30.5. I am below the range.

My Forecast Low P/E is 20.0. Over the past 10 years, low P/E ranges from 15.7 in ’20 to 31.8 in ’17 with a last-5-year mean of 22.2. I am near the bottom of the range [only ’20 and ’15 (18.4) are less].

My Low Stock Price Forecast (LSPF) is $27.50. Default ($24.20) based on initial value given above is unreasonably low at 38.8% (35.1%) less than the previous close (52-week low). My [arbitrary] selection is 30.5% (26.3%) less, respectively.

These inputs land EXLS in the HOLD zone with a U/D ratio of 2.0. Total Annualized Return (TAR) is 10.1%.

PAR (using Forecast Average—not High—P/E) of 6.1% is less than I seek for a medium-size company. If a healthy margin of safety (MOS) anchors this study, then I can proceed based on TAR instead.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on 182 studies done in the past 90 days (65 outliers including mine excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, and Forecast Low P/E are 11.8%, 13.2%, 34.4, and 22.0, respectively. I am lower across the board. VL projects a future average annual P/E of 25.0 that is less than MS (28.2) and equal to mine.

MS high / low EPS are $2.65 / $1.42 versus my $2.13 / $1.21 (per share). My high EPS is less due to a lower growth rate and initial value. VL’s ACE high EPS of $2.30 is in the middle.

MS LSPF of $31.60 implies a Forecast Low P/E of 22.3: greater than the above-stated 22.0. MS LSPF is 1.2% greater than the default $1.42/share * 22.0 = $31.24 resulting in [slightly] more aggressive zoning. MS LSPF is 14.9% greater than mine.

With regard to valuation, PEG is 1.5 and 2.0 per Zacks and my projected P/E, respectively: fairly valued (1.0 per M*). Relative Value [(current P/E) / 5-year-mean average P/E] is slightly low at 0.88.

MOS is robust in the current study because my inputs are below MS and near/below respective analyst/historical ranges. As further support, MS TAR is 7.2%/year greater than mine.

Per U/D, EXLS is a BUY under $36.60/share. BI TAR criterion would be met [64.0 / ((14.87 / 100 ) +1 ) ^ 5] = $32 with a forecast high price of $64.

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