What happened
Shares of technology consulting and services name Infosys (INFY 1.82%) advanced 13.4% in June, according to data from S&P Global Market Intelligence. The move, largely driven by the addition of new clients, tops off a 119% advance for the 12-month stretch ending last month.
So what
India's Infosys does a little of everything in terms of information technology, from general consulting to the implementation of digital transformations to overhauls of personnel recruiting and retention paradigms. This flexibility against a backdrop of a quickly changing IT landscape -- the advent of cloud computing and artificial intelligence in particular -- offers companies of this ilk plenty of opportunity to add customers that generate recurring revenue.
And Infosys has done this -- into, through, and now coming out of the pandemic. In early June the company revealed a new partnership with the French Tennis Federation that will allows broadcasters, journalists, and even fans to plug into an AI-powered app that brings the game closer to all interested parties. Just a few days later the company announced it would be working with natural gas compression outfit Archrock to provide its field service technicians with new digital and mobile tools. Last month's rally may have also been at least partially fueled by May's news that Infosys will be helping steer soft drinks company Britvic through a digital transformation.
Image source: Getty Images.
There's nothing unusual or remarkable about these headlines. Indeed, they're the norm. That, however, is the point: Infosys Limited continues to win new business. It has more than 10 years' worth of uninterrupted annual revenue growth that proves it, and profit growth that's almost as reliable.
Now what
Investors looking for a "gangbusters" level of growth here might be disappointed. The company should continue to drive double-digit sales growth for the foreseeable future, but next year's sales growth forecast of around 10% is pretty typical of the past and plausible future. There's also no denying much of this growth stems from Infosys being in the right business at the right time.
This latter point is also the reason to own a stake in Infosys now.
Lots of organizations know they need to modernize their operations. As International Business Machines recently noted, however, 60% of information technology executives say their companies' modernization programs are not ready for the future, while 80% of these executives indicate they'll be increasingly relying on partners to provide such services. It's a trend that plays right into Infosys' hand, and the slow and steady opportunity could persist for years. That makes this stock a name worth buying on any measurable dips.
