EPAM

EPAM looks mispriced after a multi-year derating. FY2025 revenue grew 15.4% to $5.46B — a clear reacceleration from the 2023-2024 stall ($4.69B → $4.73B) — and the MD&A attributes 9.2% to the NEORIS and First Derivative acquisitions plus 1.3% from FX, implying ~4.9% organic. Importantly, growth was broad-based across all five verticals, with Financial Services (+28.7% to $1.32B, now 24.1% of revenue) leading and management explicitly noting *decreased* client concentration — a quality-of-revenue improvement that the headline miss on EPS obscures.

The earnings decline is real but largely explainable. Operating margin compressed from 11.5% to 9.5% as cost of revenues rose to 71.2% of sales (vs. 69.3%) and D&A jumped 39.4% to $125M — both consistent with absorbing two Q4 2024 acquisitions. The effective tax rate also climbed to 25.3% from 22.2%, and interest/other income collapsed from $46.9M to $11.5M. Strip those non-operating drags and the underlying services business is digesting M&A rather than structurally deteriorating. Operating cash flow actually grew 17.1% to $655M against just $42M of capex — a >$600M FCF print on a $4.24B market cap (~14% FCF yield).