Tata Consultancy Services Ltd. is Rated Hold

Rating Overview and Context

On 22 April 2025, MarketsMOJO revised Tata Consultancy Services Ltd.’s rating from 'Sell' to 'Hold', accompanied by a modest increase in its Mojo Score from 48 to 51. This adjustment reflects a more balanced view of the stock’s prospects, recognising its solid fundamental strengths while acknowledging certain challenges in valuation and market performance. The 'Hold' rating suggests that investors should maintain their current positions without expecting significant near-term gains or losses, signalling a cautious but stable outlook.

Here’s How the Stock Looks Today

As of 23 February 2026, Tata Consultancy Services Ltd. continues to demonstrate robust quality metrics, with an excellent Quality Grade underpinning its business model. The company maintains a strong long-term fundamental position, highlighted by an average Return on Equity (ROE) of 43.49%, signalling efficient capital utilisation and consistent profitability. Net sales have grown at an annual rate of 10.21%, reflecting steady revenue expansion over recent years. Additionally, the company’s low average Debt to Equity ratio of zero underscores a conservative capital structure, reducing financial risk and enhancing balance sheet strength.

Despite these strengths, the Financial Grade remains flat, indicating that recent quarterly results have not shown significant improvement. For instance, the Debtors Turnover Ratio for the half-year stands at a relatively low 4.76 times, and the latest quarterly Earnings Per Share (EPS) is Rs 29.44, suggesting some pressure on operational efficiency and profitability in the short term.

Valuation and Market Performance

The stock’s Valuation Grade is assessed as fair, with a Price to Book Value ratio of 9.1. This valuation is in line with historical averages for the sector and peers, indicating that the stock is neither significantly undervalued nor overvalued at current levels. The company’s ROE of 47.3 further supports this valuation, reflecting strong profitability relative to its book value.

However, the stock’s market returns have been subdued. Over the past year, Tata Consultancy Services Ltd. has delivered a negative return of -28.89%, underperforming the BSE500 benchmark consistently over the last three years. Year-to-date, the stock has declined by 16.19%, and over the past six months, it has fallen by 13.26%. This underperformance contrasts with a modest 4.9% increase in profits over the same period, resulting in a relatively high Price/Earnings to Growth (PEG) ratio of 3.9, which may temper investor enthusiasm.

On a positive note, the company offers a high dividend yield of 4.1%, providing income-oriented investors with a steady return despite the stock’s price volatility. Institutional holdings remain strong at 23.25%, reflecting confidence from sophisticated investors who typically conduct thorough fundamental analysis before committing capital.

Technical Outlook

From a technical perspective, the stock is currently graded as bearish. This suggests that price momentum and chart patterns are not favourable in the short term, which may contribute to continued volatility or downward pressure. Investors should be mindful of this technical backdrop when considering entry or exit points, as it may influence near-term price movements independently of fundamental factors.

What the 'Hold' Rating Means for Investors

The 'Hold' rating assigned by MarketsMOJO indicates a neutral stance on Tata Consultancy Services Ltd. It suggests that while the company exhibits strong quality and stable fundamentals, valuation and technical factors do not currently support a more bullish outlook. Investors are advised to maintain existing positions rather than initiate new ones or liquidate holdings, pending clearer signals from future financial performance or market trends.

For long-term investors, the company’s excellent quality metrics and consistent revenue growth remain attractive. However, the subdued recent returns and bearish technical indicators warrant caution. The fair valuation implies that the stock is reasonably priced relative to its earnings and book value, but the elevated PEG ratio and recent profit trends suggest limited upside potential in the near term.

Overall, the 'Hold' rating reflects a balanced assessment that recognises Tata Consultancy Services Ltd.’s strengths while acknowledging the challenges it faces in delivering superior returns in the current market environment.

Summary and Investor Takeaways

In summary, Tata Consultancy Services Ltd. holds a 'Hold' rating as of 22 April 2025, with all current financial and market data reflecting the situation as of 23 February 2026. The company’s excellent quality and steady revenue growth provide a solid foundation, but flat financial trends and bearish technical signals temper enthusiasm. Valuation remains fair, and the stock’s dividend yield offers a cushion for income-focused investors.

Investors should consider maintaining their current holdings while monitoring upcoming quarterly results and market developments. The stock’s underperformance relative to benchmarks over recent years suggests that patience and careful analysis are warranted before increasing exposure. The 'Hold' rating encapsulates this balanced view, advising neither aggressive buying nor selling at present.

Key Metrics at a Glance (As of 23 February 2026):

• Mojo Score: 51.0 (Hold)
• Return on Equity (ROE): 43.49%
• Net Sales Growth (Annual): 10.21%
• Debt to Equity Ratio: 0 (average)
• Price to Book Value: 9.1
• PEG Ratio: 3.9
• Dividend Yield: 4.1%
• Institutional Holdings: 23.25%
• 1-Year Stock Return: -28.89%
• Technical Grade: Bearish

These figures provide a comprehensive snapshot of the company’s current standing, helping investors make informed decisions aligned with their risk tolerance and investment horizon.

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