Globant S.A. (GLOB - Get Rating) is a global technology services firm. It provides transformational programs, ROI and cost efficiency, new income sources, and E-mission. The information technology services company announced $0.85 earnings per share for the first quarter ended March 31, 2022, topping the average estimate of $0.79 by $0.06. Revenue for the quarter was $379.82 million, compared to the consensus expectation of $361.26 million.

However, its shares are down 18.35% over the past year and 43.3% year-to-date to close yesterday’s trading session at $178.09. in addition, the stock is currently trading 49.8% below its 52-week high of $354.62, which it hit on November 09, 2021.

In addition, last month, equity research analysts at TheStreet downgraded the stock’s rating from “b- to “c+.”

Here’s what could shape GLOB’s performance in the near term:

Strong Profitability

GLOB’s trailing-12-month EBITDA margin of 16.8% is 25.9% higher than the industry average of 13.3%. Its trailing-12-month net income margin is 45.5% higher than its respective industry average. Also, its trailing-12-month asset turnover ratio, ROC, and ROA are 42.1%, 90.4%, and 93% higher than their respective industry averages.

Premium Valuation

In terms of forward non-GAAP P/E, the stock is currently trading at 38.7x, 115% higher than the industry average of 18.04x. Also, its trailing-12-month EV/Sales of 4.43x is 57.4% higher than the industry average of 2.81x. Moreover, GLOB’s forward Price/Sales of 4.55x is 59.2% higher than the industry average of 2.86x.

POWR Ratings Reflect Uncertainty

GLOB has an overall C rating, which equates to a Neutral in our proprietary POWR Ratings system. The POWR ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. GLOB has a D grade for Value and a B for Quality. The company’s higher-than-industry valuation is consistent with the Value grade. In addition, its strong profitability is in sync with the Quality grade.

Of the 31 stocks in the F-rated Internet – Services industry, GLOB is ranked #10.

Beyond what I’ve stated above, you can view GLOB ratings for Growth, Stability, Momentum, and Sentiment here.

Bottom Line

The stock is currently trading below its 50-day and 200-day moving averages of $208.47 and $263.53, respectively, indicating a bearish sentiment. In addition, its lofty valuation and the recent rating downgrade on the stock could be concerning. So, we think investors should wait before buying its shares.

How Does Globant S.A. (GLOB) Stack Up Against its Peers?

While GLOB has an overall C rating, one might want to consider its industry peer, Liquidity Services Inc. (LQDT - Get Rating), which has an overall A (Strong Buy) rating, and Perion Network Limited (PERI - Get Rating), and Shutterstock Inc. (SSTK - Get Rating), which has an overall B (Buy) rating.

GLOB shares were trading at $176.17 per share on Tuesday morning, down $1.92 (-1.08%). Year-to-date, GLOB has declined -43.91%, versus a -21.18% rise in the benchmark S&P 500 index during the same period.

About the Author: Pragya Pandey

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate. More...

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