This Artificial Intelligence Stock Has Rallied 45% in 2024 Already

Sharing is caring.

If there's one company that comes to my mind that lives by this motto, it has to be Oracle Financial Services (OFSS).

OFSS stands head and shoulders above any other company when it comes to dividend payouts.

Just look at this table.

OFSS - Dividend Over the Years

Year End/Source Date	Dividend %	Dividend Yield %	Dividend per Share (Rs)
26-Apr-23	4500	4.42	225
31-Mar-23	4500	6.89	225
31-Mar-22	3800	5.29	190
31-Mar-21	4000	6.25	200
31-Mar-20	3600	8.86	180
31-Mar-18	2600	3.48	130
31-Mar-17	3400	4.46	170
31-Mar-16	2000	2.83	100
31-Mar-15	13300	20.41	665

Data Source: Ace Equity

Every time I discuss the topic of dividends with my friends and how they should have a significant allocation of capital in high-yielding dividend stocks, they're surprised by the fact about a company paying them regularly for owning its stock.

By investing in the best dividend stocks, you get a steady cash flow in the form of dividends while simultaneously enjoy the benefits of capital appreciation.

On 18 January 2024, share price of Oracle Financial Services shot up by more than 20% to hit a new peak of Rs 6,238 on the BSE.

Never in its history has the company seen such a sharp move in its share price in a single trading session!

In fact, after today's rally, the stock is now a multibagger, having delivered 100% returns in the past one year.

Let's find out why the stock is rising, what are the future growth prospects and whether you should expect a higher dividend payout going forward.

Why OFSS Share Price is Rising

#1 Strong Q3 Results

The strong single day rally that we saw today comes after the IT company posted strong set of numbers in its latest quarterly earnings.

OFSS reported a 69.4% year-on-year (YoY) jump in net profit at Rs 7.4 billion (bn) for the third quarter that ended 31 December 2023.

Revenue from operations spiked 26% to Rs 18.2 bn as against Rs 14.5 bn reported in the corresponding period last year.

The company's MD and CEO Makarand Padalkar said that license fee signings aided the margins during the quarter.

• "Our license fee signings were US$ 49.5 million across our product lines for both Cloud/SaaS and on-premises deployment modes. For the nine months ended December 2023, our license signings were US$ 117.4 million, 76% higher than the corresponding period last fiscal."

During the quarter, the company's operating margin came in at 46.1% while net profit margins came at 40.6%.

OFSS signed a landmark cloud deal with Navy Federal Credit Union, USA, during the quarter.

The company's management also highlighted that they continue to see a robust deal pipeline across all the regions.

Here's the press release showing some of the main deals.

You can check the entire press release here where they've mentioned all the deals.

What Next?

The sentiment around IT stocks has turned positive ever since IT majors TCS, Wipro, and Infosys posted earnings for the third quarter.

For Oracle Financial, the growth in the fintech space will keep the company in focus. In FY23, its revenue from the cloud services grew by around 23%.

The company's profit fell last year primarily due to new restrictions in the digital finance industry. The government imposed certain restrictions on digital lending, BNPL, and similar services, which affected margins.

With the adoption of artificial intelligence (AI) in every industry, the future of Oracle Financial looks promising.

A steady increase in profit could result in OFSS paying even higher dividends going forward.

In recent years, OFSS has made significant investments in rapidly moving its solutions to cloud and launched solutions for Liquidity Management, Virtual Account Management, and Supply Chain Finance as cloud services, much ahead of its peers.

The adoption of AI in financial services and fintech companies is expected to grow at a CAGR of 23.37% in the next two years, which is a huge prospect for Oracle Financial as a leader in the AI space.

The latest shareholding of OFSS also shows that domestic mutual funds have added exposure to the company for the past two quarters.

Now coming to its valuations, OFSS currently trades a PE multiple of 25x, compared to its five-year average of 17.6x, and its P/BV is around 7x compared to the five-year average of 4.6x.

Here's a table comparing OFSS with its industry peers.

Comparative Analysis

Company	OFSS	Birlasoft	Cyient	Zensar Tech
ROE (%)	25.4	13.4	15.8	11.7
ROCE (%)	35.5	18.3	19.9	16.7
Latest EPS (Rs)	211.8	13.7	60.1	23.2
TTM PE (x)	24.1	58.4	37.9	24.8
TTM Price to book (x)	6.8	8.1	6.3	4.1
Dividend yield (%)	4.4	0.4	1.1	0.9
Industry PE	31.5
Industry PB	8.3

Data Source: Ace Equity

How OFSS Share Price has Performed Recently

In the past five days, the share price of OFSS has moved up by 37%.

OFSS rallied over 20% today registering its best ever day.

OFSS has a 52-week high of Rs 6,238 touched today and a 52-week low of Rs 2,987 touched on 1 February 2023.

About Oracle Financial

OFSS, majority owned by Oracle, is a world leader in providing IT solutions to the financial services industry.

The company develops, sells and markets computer software, computer systems, and provides consultancy and other information technology (IT) related activities.

To know more, check out OFSS financial factsheet and its latest quarterly results.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...