TLPFY - Teleperformance: A Hidden Gem With Significant Upside Potential Amidst Market Skepticism

2024-05-23 15:05:46 ET

Summary

• Teleperformance presents a potential investment opportunity despite a significant 73% drop in share prices from its peak, driven by slower revenue growth post Covid, AI fears, market normalization and skepticism over the Majorel acquisition.
• TLPFF is the largest global process outsourcing (BPO) company with operations spanning over 91 countries and 500,000 employees. It holds a 10% market share in the customer experience industry.
• While AI poses a potential threat, TLPFF is leveraging it to enhance operational efficiency and service offerings.
• The company is involved in over 250 AI projects, including generative AI (GenAI) and has partnerships with ServiceNow and Microsoft to develop AI solutions.
• The acquisition of Majorel strengthens TLPFF's presence in Europe and introduces the company to high growth sectors like social media, luxury goods, automotive and travel.

Investment Thesis

Teleperformance SE ( TLPFF ) is expected to generate around €10m in annual sales and €1 billion in free cash flow, with a leading EBITDA margin of 20%. Despite this strong financial performance and FCF yield of 15% on the market cap., TLPFF's shares have dropped significantly due to slower revenue growth post covid, fears of AI replacing contact centers, normalization of market multiples from the peak of 2021, and skepticism over the Majorel acquisition. These factors have led to a conservative valuation of 5x NTM EV/EBITDA and 6.86x NTM P/E multiple....

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