TCS ViewReport

Morningstar Equity Analyst Report | Report as of 21 Jul 2015 | Page 1 of 8
Tata Consultancy Services Ltd TCS (XNSE)

Morningstar Rating
Last Price
Fair Value Estimate
Price/Fair Value
Dividend Yield %
Market Cap (Bil)
Industry
Stewardship
QQQ
2,561.70 INR
2645.00 INR
0.97
1.53
5,017.67
Information Technology Services
Exemplary
21 Jul 2015
21 Jul 2015
21 Jul 2015
21 Jul 2015
Morningstar Pillars
Analyst
Quantitative
Economic Moat
Valuation
Uncertainty
Financial Health
Narrow
QQQ
Medium
Wide
Fairly Valued
High
Strong
Source: Morningstar Equity Research
Quantitative Valuation
TCS
IND
Undervalued
Fairly Valued
Price/Quant Fair Value

Price/Earnings
Forward P/E
Price/Cash Flow
Price/Free Cash Flow
Dividend Yield %
Overvalued
Current
5-Yr Avg
1.02
23.5
20.2
34.2
1.53
24.7
32.4
42.6
1.10
Sector Country
0.87
21.7
15.6
14.5
20.4
1.80
0.81
18.0
20.4
9.8
10.5
1.05
Source: Morningstar
Bulls Say
OThe growing adoption of IT services in
continental Europe and emerging markets
provides a long-term growth avenue for TCS. We
expect the firm to supplement its organic growth
in these markets with acquisitions.
OTCS is poised to benefit from spending related
to emerging SMAC technologies. The firms early
investments in a Silicon Valley customer
collaboration center and its digital enterprise
offerings should help drive its future service
relevance.
OThe company boasts one of the lowest attrition
rates in the industry (approximately 12%), which
helps with operating stability.
Bears Say
OTCS derives a significant portion of its revenue
from banking, financial services, and insurance,
North America, and application development and
maintenance. Any notable pullback in these
businesses will have a magnified effect on the
firms operating performance.
OTCS has to quell ongoing wage inflation, which
has the potential to eat into operating margins.
OThe company lacks a strong consulting practice
and is exposed to commodification. Therefore, it
needs to continually innovate in order to remain
relevant in the marketplace.
TCS Strategy Outlines the Importance of Outsourcing 2.0 and Shift to

Digital Services
Andrew Lange, Analyst, 16 April 2015
Analyst Note
Investment Thesis
Late last week TCS reported a solid start to its fiscal year.
Good demand from the company's core markets such as
North America, Financial Services, Retail, and Life
Sciences helped drive healthy bookings and constant
currency revenue growth. As a result, our outlook for the
year remains unchanged and we reiterate our INR 2,645
fair value estimate and narrow economic moat rating.
Tata Consultancy Services is Indias first and largest

software exporter. Its long-term success comes from a
disciplined approach to project execution and a concerted
emphasis on customer satisfaction. TCS extensive global
delivery network and full suite of IT services allows the
firm to support the worlds largest enterprises, which sets
it apart from smaller rivals. The firms operations are fairly
concentrated in North America, application development
and maintenance, and banking, financial services, and
insurance. However, TCS is looking to diversify its
exposure. We expect the firm to expand its presence in
underpenetrated geographies while developing its
expertise in industries outside BFSI and in services
associated with social, mobile, analytics, and cloud-based
technologies. To achieve this, organic growth will be
supplemented with acquisitions.
As TCS expands its client base and develops meaningful
relationships within those clients, it is able to cross-sell
services and gain an intimate knowledge of customers IT
processes. This client-vendor relationship takes years to
cultivate, and once established, it typically leads to
significant vendor switching costs. Given such switching
costs, we forecast fairly steady financial performance
from TCS over the long term. We think the firm will
continue to post industry-leading revenue growth and
benefit from a narrow economic moat.
We expect TCS to push further into Asia Pacific, Latin
America, and the Middle East and Africa due to the infancy
of these markets. In fact, the contribution to group revenue
(approximately 12%) from these new growth markets has
almost doubled in the past decade. In addition, we think
continental Europes increasing willingness to adopt
offshore IT services will provide a tailwind for the firm.
We think TCS recent acquisition of leading French
systems integrator Alti will strengthen TCS footprint and
signifies its intent to grow in the region. Strong demand
for SMAC services is also expected to drive TCS growth.
The firms investment in a customer collaboration center
in Silicon Valley demonstrates the future importance of
these services.
Andrew Lange, Analyst, 14 July 2015
TCS' recent results continue to reinforce our view of the

digital era (or what we have previously termed as
Outsourcing 2.0). We believe the proliferation of digital
technologies will require the offshore Indian IT service
vendors to provide more operationally differentiated
services instead of just traditional cost-cutting. Notably,
during the quarter, TCS announced the launch of a new
AI-based automation platform called Ignio. Ignio aims to
automate most of the tasks that currently make up IT
maintenance and has the ability to pre-emptively fix
system failures before they happen. We foresee these
types of technology platforms to help drive digital-related
revenue streams in the next era of IT outsourcing. To that
end, TCS also broke out its digital revenue for the first
time. Digital, which is spread across numerous service
lines, contributed to 12.5% of group revenue for the
quarter and grew double-digits on a sequential basis.
Management is adamant that over the midterm most of
TCS' services will be predominantly digitally focused, and
we agree. In order to meet this new operating paradigm
and future demand environment, the firm plans to re-skill
its work force via its Digital Learning Platform, which will
train roughly 100,000 employees to be more digital savvy
across all industry verticals. We think these strategic
moves will help TCS defend its narrow moat position and
keep competitive and technology risks at bay for the
foreseeable future. Still, we see the firm fairly valued at
these levels and would recommend a larger margin of
safety before investing.
Economic Moat
TCS has a narrow economic moat as a result of meaningful

switching costs. The company is focused on establishing
and fostering deep customer relationships that provide it
with long-dated and consistent business. Once
2015 Morningstar. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. Data as originally reported. The information contained
herein is not represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security. Redistribution is prohibited without
written permission. To order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869. See last page for important disclosures.
Morningstar Equity Analyst Report |Page 2 of 8

Morningstar Rating
Last Price
Fair Value Estimate
Price/Fair Value
Dividend Yield %
Market Cap (Bil)
Industry
Stewardship
QQQ
2,561.70 INR
2645.00 INR
0.97
1.53
5,017.67
Exemplary
21 Jul 2015
21 Jul 2015
21 Jul 2015
21 Jul 2015
Close Competitors
Currency (Mil)
Market Cap
TTM Sales
Operating Margin
TTM/PE
Accenture PLC ACN
USD
65,507
32,817
13.47
22.78
Cognizant Technology Solutions Corp CTSH
USD
36,930
10,752
17.91
25.19
Wipro Ltd WIT
USD
30,024
7,670
20.32
21.98
SG&A expenses. Our discounted cash flow model

assumes that TCS will generate a return on invested
capital that comfortably covers its 10.5% weighted
average cost of capital.
Risk
established within a client, TCS end-to-end services
portfolio and ubiquitous global presence allow the firm to
cross-sell and develop deeper roots with clients. At the
end of fiscal 2014, TCS had expanded its $1 million-plus
client base to more than 1,500 from roughly 360 in 2005,
which demonstrates its ability to attract and expand
within large clients. In addition, we estimate group
revenue from repeat business to be in the high 90s. This
high rate of repeat business exemplifies clients
reluctance to switch between IT service vendors as
established end-to-end vendors become more intertwined
in the central IT operations of its customers. Still, we are
reluctant to assign TCS a wide economic moat, given the
firms use of an industrial model that leverages a largely
junior workforce that often relies on scale to be
competitive. In addition, TCS lacks a strong consulting
practice and faces competitive threats in service areas
such as business process outsourcing and application
development and maintenance.
Valuation
We are raising our fair value estimate to INR 2,645 per

share from INR 2,540 as we recalibrate our cost of capital
assumptions to better align with returns that equity
investors are likely to demand over the long run. Our
updated fair value estimate implies forward fiscal-year
price/earnings of 21 times, an enterprise value/EBITDA
of 15.5 times, and a free cash flow yield of 3.5%. Barring
any momentous acquisitions, we think the firms top-line
growth will be less prolific than its historical average due
to the increasing maturity of the North American and
European outsourcing markets (excluding continental
Europe). In addition, we believe the law of larger numbers
and tougher comparable growth rates will damp TCS
forward growth rate. We forecast mid- to high teens
revenue growth for the company over our explicit forecast
period, which is still impressive for such a large company.
TCS has a targeted operating margin band of roughly
26%-28%. We assume the firm will be able to manage
this margin level going forward and believe it will be able
to offset slightly higher employee costs by reducing its
TCS primary risk is the highly competitive IT services

industry. The firm needs to continually reinvest in new
intellectual property and deliver differentiated services,
or face commodification and competitive displacement.
Furthermore, potentially restrictive immigration reform
could reduce TCS ability to use offshore leverage for
onshore work, which would increase staff costs. With TCS
generating the majority of its revenue from offshore
markets, fluctuations in the rupee can have a noticeable
impact on financial results. Macroeconomic weakness in
the North American market (roughly 55% of group
revenue) or the banking, financial services, and insurance
industry (approximately 43% of group revenue) will have
a substantial impact on the companys overall results.
Management
Andrew Lange, Analyst, 02 March 2015
We view TCS stewardship of shareholder capital as

exemplary. TCS is headed by CEO and managing director
Natarajan Chandrasekaran (commonly known as
Chandra). Chandra has held TCS reins since October 2009
and has been with the firm since 1987. Before his
appointment as CEO, Chandra was COO and executive
director. Chandra has been instrumental in streamlining
the firm and creating more agile business segments that
are focused on specific verticals and geographies.
Chandra has been the recipient of many awards for
outstanding leadership, and we think he is well suited to
lead the company forward.
Approximately 74% of TCS is held by Tata Sons Limited.
This concentrated ownership structure sidelines all other
investors. However, we think TCS market positioning and
impressive financial performance signify the board's and
managements commitment to maximizing shareholder
returns. In fact, since 2005, TCS has increased revenue at
a 27% compound annual growth rate. In addition, over the
same period, the dividend has grown more than 1,000%
and the firm has raised its payout ratio (excluding special
dividends) into the mid-30s from the mid-20s.
TCS is focused on expanding its geographic presence and

Morningstar Rating
Last Price
Fair Value Estimate
Price/Fair Value
Dividend Yield %
Market Cap (Bil)
Industry
Stewardship
QQQ
2,561.70 INR
2645.00 INR
0.97
1.53
5,017.67
Exemplary
21 Jul 2015
21 Jul 2015
21 Jul 2015
21 Jul 2015
reducing its concentration in North America and the

United Kingdom. Recently, the firm made further inroads
into the underpenetrated continental European market via
its acquisition of Alti, which is regarded as a premier
systems integrator in France across various industries. In
addition, TCS wishes to expand into higher-growth
markets such as Asia Pacific, Latin America, and the
Middle East and Africa. The revenue contribution from
these markets has doubled over the past decade to
approximately 12%. Furthermore, management has
targeted newer service lines (now 33% of group revenue)
in order to reduce its reliance on application development
and maintenance work and increased intellectual property
development associated with social, mobile, analytic,
cloud, and robotic technologies.

Morningstar Rating
Last Price
Fair Value Estimate
Price/Fair Value
Dividend Yield %
Market Cap (Bil)
Industry
Stewardship
QQQ
2,561.70 INR
2645.00 INR
0.97
1.53
5,017.67
Exemplary
21 Jul 2015
21 Jul 2015
21 Jul 2015
21 Jul 2015
Analyst Notes Archive

TCS Strategy Outlines the Importance
Outsourcing 2.0 and Shift to Digital Services
of
Andrew Lange, Analyst, 14 July 2015
Late last week TCS reported a solid start to its fiscal year.
Good demand from the company's core markets such as
North America, Financial Services, Retail, and Life
Sciences helped drive healthy bookings and constant
currency revenue growth. As a result, our outlook for the
year remains unchanged and we reiterate our INR 2,645
fair value estimate and narrow economic moat rating.
TCS' recent results continue to reinforce our view of the
digital era (or what we have previously termed as
Outsourcing 2.0). We believe the proliferation of digital
technologies will require the offshore Indian IT service
vendors to provide more operationally differentiated
services instead of just traditional cost-cutting. Notably,
during the quarter, TCS announced the launch of a new
AI-based automation platform called Ignio. Ignio aims to
automate most of the tasks that currently make up IT
maintenance and has the ability to pre-emptively fix
system failures before they happen. We foresee these
types of technology platforms to help drive digital-related
revenue streams in the next era of IT outsourcing. To that
end, TCS also broke out its digital revenue for the first
time. Digital, which is spread across numerous service
lines, contributed to 12.5% of group revenue for the
quarter and grew double-digits on a sequential basis.
Management is adamant that over the midterm most of
TCS' services will be predominantly digitally focused, and
we agree. In order to meet this new operating paradigm
and future demand environment, the firm plans to re-skill
its work force via its Digital Learning Platform, which will
train roughly 100,000 employees to be more digital savvy
across all industry verticals. We think these strategic
moves will help TCS defend its narrow moat position and
keep competitive and technology risks at bay for the
foreseeable future. Still, we see the firm fairly valued at
these levels and would recommend a larger margin of
safety before investing.
that were in line with our financial expectations. The

company continues to experience fairly broad-based
growth across all industries and services. Tata remains
highly relevant to clients, which is exemplified by the
multitude of contract wins during the year. In addition, the
firm is making significant investments in order to ensure
the continuation of this market position. Current
investments include a new artificial intelligence software
platform that will automate business operations and
Tata's cloud platforms across human resources, finance
and accounting, procurement, and analytics. Because of
the companys investments in digital, platform, and
automation tools, management is confident in the coming
years financial performance. While the firm does not
provide explicit financial guidance, it does expect to grow
faster than the Indian IT industry forecast of 12%-14%.
Our financial expectations remain largely unchanged since
our cost of capital adjustment on March 2. We reiterate
our INR 2,645 fair value estimate and narrow economic
moat rating. With the firm trading close to our fair value
estimate, we would recommend a wider margin of safety
before investing.
For the full year, revenue rose 15.7% to INR 946.5 billion
year over year (improved 17% on a constant-currency
basis). The telecom and insurance industries continue to
experience headwinds. However, the remaining industries
all grew double digits over the year, led by media and
entertainment, manufacturing, and health care.
Encouragingly, revenue from continental Europe surged
25% in constant currency and remains one of our key
long-term growth drivers for Tata and other offshore IT
service providers. Tata's operating margin was down 224
basis points to 26.9%, but well within the firms targeted
range of 26%-28% as the firm invests in next-generation
platforms and tools.
Tata Reports Solid Full-Year Results and BroadBased Growth; Shares Fairly Valued
Tata Consulting reported solid full-year fiscal 2015 results
Page
Page
5 of1 8of 1
Quantitative Equity Report | Release Date: 21 July 2015 | Reporting Currency: INR | Trading Currency: INR
Tata Consultancy Services Ltd TCS

Last Close
Quantitative Fair Value Estimate
Market Cap (Bil)
Sector
Industry
2,561.70
2,526.92
5,051.9
a Technology
Information Technology
Services
Tata Consultancy Services Ltd is an Information Technology

(IT) services, consulting and business solutions company. The
Company provides end-to-end technology and technology
related services to corporations all over the world.
Country of Domicile
IND India
Price Versus Quantitative Fair Value

2011
2012
2013
2014
2015
2016
Sales/Share
Forecast Range
Forcasted Price
Dividend
Split
Quantitative Fair Value Estimate

3,740
Total Return
Quantitative Scores
2,992
Scores
Momentum:
Standard Deviation: 24.19
All Rel Sector Rel Country
Quantitative Moat
Wide
100
Valuation
Fairly Valued 12
Quantitative Uncertainty High
96
Financial Health
Strong
92
100
14
98
83
2,244
100
5
100
94
1,496
2,345.00
52-Wk
2,839.70
5-Yr
2,839.70
748
TCS
828.55
IND
Undervalued
Fairly Valued
Overvalued
Valuation
Sector
Median
Country
Median
24.7
32.4
42.6
1.10
9.3
5.6
0.87
21.7
15.6
14.5
20.4
1.80
2.1
1.5
0.81
18.0
20.4
9.8
10.5
1.05
1.1
0.8
Current 5-Yr Avg
Sector
Median
Country
Median
11.6
6.2
0.4
10.1
3.5
6.5
Current 5-Yr Avg
Price/Quant Fair Value

Price/Earnings
Forward P/E
Price/Cash Flow
Price/Free Cash Flow
Dividend Yield %
Price/Book
Price/Sales
1.02
23.5
20.2
34.2
1.53
9.2
5.5
Profitability
Return on Equity %
Return on Assets %
Revenue/Employee (Mil)
3.1
41.2
29.6
2.2
Score
100
Quantitative Moat
80
60
40
20
0
2008
2009
2010
2011
2012
2013
2014
Financial Health
Current 5-Yr Avg
Distance to Default
Solvency Score
Assets/Equity
Long-Term Debt/Equity
2015
Sector
Median
Country
Median
0.6
459.9
1.6
0.1
0.6
558.7
1.9
0.2
0.8
1.4
0.0
1.4
0.0
1-Year
3-Year
5-Year
10-Year
29.9
40.4
37.6
47.1
27.2
7.4
29.9
32.1
28.4
60.9
26.1
30.2
24.1
29.5
29.0
25.8
26.6
24.0
Growth Per Share

Revenue %
Operating Income %
Earnings %
Dividends %
Book Value %
Stock Total Return %
0.9
17.0
10.4
-7.4
74.9
56.6
21.2
24.5
1.5
-5.0
1.38
25.1
6.1
1.35
18.7
4.1
1.10
27.2
5.9
1.33
23.3
5.6
1.53
23.5
5.5
Total Return %
+/ Market (Morningstar World
Index)
Dividend Yield %
Price/Earnings
Price/Revenue
Undervalued
Fairly Valued
Overvalued
Monthly Volume (Thousand Shares)

Liquidity: High
3,585
2010
2011
2012
2013
2014
TTM
300,289
8.0
373,245
24.3
488,938
31.0
629,895
28.8
818,094
29.9
919,797
12.4
Financials (Fiscal Year in Mil)

Revenue
% Change
82,896
70,006
110,206
32.9
90,680
139,233
26.3
104,135
180,897
29.9
139,173
254,019
40.4
191,639
283,856
11.7
214,971
Operating Income
% Change
Net Income
74,062
-10,448
63,614
21.2
66,381
-18,503
47,878
12.8
70,084
-20,071
50,013
10.2
116,150
-26,378
89,771
14.3
147,514
-31,262
116,253
14.2
147,514
-31,262
116,253
12.6
Operating Cash Flow

Capital Spending
Free Cash Flow
% Sales
35.67
33.0
32.50
46.27
29.7
24.46
53.07
14.7
24.46
70.99
33.8
25.48
97.67
37.6
45.79
109.67
12.3
59.31
EPS
% Change
Free Cash Flow/Share
11.00
94.35
1,957
6.00
125.20
1,957
17.00
125.20
1,959
17.00
151.13
1,959
25.00
248.61
1,959
34.00
247.41
1,959
Dividends/Share
Book Value/Share
Shares Outstanding (Mil)
41.0
27.9
23.3
1.20
1.5
42.1
30.1
24.3
1.24
1.3
38.4
28.0
21.3
1.32
1.4
40.7
29.7
22.1
1.34
1.4
43.6
32.1
23.4
1.37
1.4
23.4
1.4
Profitability
Return on Equity %
Return on Assets %
Net Margin %
Asset Turnover
Financial Leverage
39.5
27.6
720
39.1
29.5
368
38.7
28.5
28
37.8
28.7
15
39.5
31.1
10
43.4
30.9
Gross Margin %
Operating Margin %
Long-Term Debt
184,667
7.1
245,048
7.7
295,792
8.4
386,457
8.9
491,948
9.0
550,240
Quarterly Revenue & EPS

Revenue (Bil)
Jun
2015
221.1
2014
179.9
2013
148.7
2012
Earnings Per Share

2015
28.42
2014
19.54
2013
16.92
2012
Total Equity
Fixed Asset Turns
Revenue Growth Year On Year %

Sep
238.2
209.8
156.2
Dec
245.0
212.9
160.7
132.0
Mar
215.5
164.3
132.6
Total
818.1
629.9
488.9
26.78
23.63
17.51
27.20
27.20
18.10
14.30
27.27
18.46
14.70
97.67
70.99
53.07
34.3
32.5
31.2
22.9
21.0
13.5
2013
2014
2015 Morningstar. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. Data as originally reported. The information
contained herein is not represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security. Redistribution
is prohibited without written permission. To order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869.
16.1
15.1
2015
Morningstar
Morningstar Equity
Equity Analyst
Analyst Report
Report |Page 6 of 8
Morningstar Equity Research Methodology

Fundamental Analysis
At Morningstar, we believe buying shares of superior
businesses at a discount and allowing them to compound over time is the surest way to create wealth in
the stock market. The long-term fundamentals of businesses, such as cash flow, competition, economic cycles, and stewardship, are our primary focus. Occasionally, this approach causes our recommendations to
appear out of step with the market, but willingness to
be contrarian is an important source of outperformance and a benefit of Morningstars independence.
Our analysts conduct primary research to inform our
views on each firms moat, fair value and uncertainty.
Fundamental Economic
Fair Value
Moat Rating Estimate
Analysis
Uncertainty
Assessment
QQQQQ
QQQQ
QQQ
QQ
Q
Star
Rating
Economic Moat
The economic moat concept is a cornerstone of Morningstars investment philosophy and is used to distinguish high-quality companies with sustainable competitive advantages. An economic moat is a structural
feature that allows a firm to sustain excess returns
over a long period of time. Without a moat, a companys profits are more susceptible to competition. Companies with narrow moats are likely to achieve normalized excess returns beyond 10 years while wide-moat
companies are likely to sustain excess returns beyond
20 years. The longer a firm generates economic profits,
the higher its intrinsic value. We believe lower-quality
no-moat companies will see their returns gravitate to-
ward the firms cost of capital more quickly than companies with moats will. We have identified five sources of
economic moats: intangible assets, switching costs,
network effect, cost advantage, and efficient scale.
Fair Value Estimate

Our analyst-driven fair value estimate is based primarily on Morningstars proprietary three-stage discounted
cash flow model. We also use a variety of supplementary fundamental methods to triangulate a companys
worth, such as sum-of-the-parts, multiples, and yields,
among others. Were looking well beyond next quarter
to determine the cash-generating ability of a companys
assets because we believe the market price of a security will migrate toward the firms intrinsic value over
time. Economic moats are not only an important sorting
mechanism for quality in our framework, but the designation also directly contributes to our estimate of a
companys intrinsic value through sustained excess returns on invested capital.
Uncertainty Rating
The Morningstar Uncertainty Rating demonstrates our
assessment of a firms cash flow predictability, or valuation risk. From this rating, we determine appropriate
margins of safety: The higher the uncertainty, the wider
the margin of safety around our fair value estimate before our recommendations are triggered. Our uncertainty ratings are low, medium, high, very high, and extreme. With each uncertainty rating is a corresponding
set of price/fair value ratios that drive our recommendations: Lower price/fair value ratios (<1.0) lead to positive recommendations, while higher price/fair value
Economic Moat
C O M PE T I T I V E F O R C E S
WIDE
Moat Sources:
Intangible
Assets
NARROW
NONE
Switching
Costs
COMPANY PROFITABILITY
Network
Effect
Cost
Advantage
Efficient
Scale
Morningstar
Morningstar Equity
Equity Analyst
Analyst Report
Report |Page 7 of 8
Morningstar Equity Research Methodology

ratios (>1.0) lead to negative recommendations. In very
rare cases, the fair value estimate for a firm is so unpredictable that a margin of safety cannot be properly
estimated. For these firms, we use a rating of extreme.
Very high and extreme uncertainty companies tend to
have higher risk and volatility.
Quantitatively Driven Valuations

To complement our analysts work, we produce Quantitative Ratings for a much larger universe of companies.
These ratings are generated by statistical models that
are meant to divine the relationships between Morningstars analyst-driven ratings and key financial data
points. Consequently, our quantitative ratings are directly analogous to our analyst-driven ratings.
Quantitative Fair Value Estimate (QFVE): The QFVE is
analogous to Morningstars fair value estimate for
stocks. It represents the per-share value of the equity
of a company. The QFVE is displayed in the same currency as the companys last close price.
Valuation: The valuation is based on the ratio of a companys quantitative fair value estimate to its last close price.
Understanding Differences Between Analyst

and Quantitative Valuations
If our analyst-driven ratings did not sometimes differ
from our quantitative ratings, there would be little value in producing both. Differences occur because our
quantitative ratings are essentially a highly sophisticated analysis of the analyst-driven ratings of comparable companies. If a company is unique and has few
comparable companies, the quantitative model will
have more trouble assigning correct ratings, while an
analyst will have an easier time recognizing the true
characteristics of the company. On the other hand, the
quantitative models incorporate new data efficiently
and consistently. Empirically, we find quantitative ratings and analyst-driven ratings to be equally powerful
predictors of future performance. When the analystdriven rating and the quantitative rating agree, we find
the ratings to be much more predictive than when they
differ. In this way, they provide an excellent second
opinion for each other. When the ratings differ, it may
be wise to follow the analysts rating for a truly unique
company with its own special situation, and follow the
quantitative rating when a company has several reasonable comparable companies and relevant information is flowing at a rapid pace.
Quantitative Uncertainty: This rating describes our level of uncertainty about the accuracy of our quantitative
fair value estimate. In this way it is analogous to Morningstars fair value uncertainty ratings.
Quantitative Economic Moat: The quantitative moat
rating is analogous to Morningstars analyst-driven
economic moat rating in that both are meant to describe the strength of a firms competitive position.
Uncertainty Rating
Price/Fair Value
2.00
Q
1.75
175%
1.50
1.25
1.00
0.75
155%
125%
95%
QQ
135%
105%
80%
125%
115%
110%
QQQ
90%
85%
80%
70%
60%
0.50
50%
QQQQ
QQQQQ
0.25
Low
Uncertainty Rating
Medium
High
Very High

Morningstar Rating
Last Price
Fair Value Estimate
Price/Fair Value
Dividend Yield %
Market Cap (Bil)
Industry
Stewardship
QQQ
2,561.70 INR
2645.00 INR
0.97
1.53
5,017.67
Exemplary
21 Jul 2015
21 Jul 2015
21 Jul 2015
21 Jul 2015
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Morningstar Equity Analyst Report | Report as of 21 Jul 2015 | Page 1 of 8

Tata Consultancy Services Ltd TCS (XNSE)

Fair Value Estimate

Market Cap (Bil)

Information Technology Services

Source: Morningstar Equity Research

Price/Quant Fair Value

TCS Strategy Outlines the Importance of Outsourcing 2.0 and Shift to

Tata Consultancy Services is Indias first and largest

TCS' recent results continue to reinforce our view of the

TCS has a narrow economic moat as a result of meaningful

Morningstar Equity Analyst Report |Page 2 of 8

Tata Consultancy Services Ltd TCS (XNSE)

Fair Value Estimate

Market Cap (Bil)

Information Technology Services

Accenture PLC ACN

Cognizant Technology Solutions Corp CTSH

Wipro Ltd WIT

SG&A expenses. Our discounted cash flow model

We are raising our fair value estimate to INR 2,645 per

Andrew Lange, Analyst, 16 April 2015

TCS primary risk is the highly competitive IT services

We view TCS stewardship of shareholder capital as

Morningstar Equity Analyst Report |Page 3 of 8

Tata Consultancy Services Ltd TCS (XNSE)

Fair Value Estimate

Market Cap (Bil)

Information Technology Services

reducing its concentration in North America and the

Morningstar Equity Analyst Report |Page 4 of 8

Tata Consultancy Services Ltd TCS (XNSE)

Fair Value Estimate

Market Cap (Bil)

Information Technology Services

Analyst Notes Archive

Andrew Lange, Analyst, 14 July 2015

that were in line with our financial expectations. The

Tata Consulting reported solid full-year fiscal 2015 results

Tata Consultancy Services Ltd TCS

Quantitative Fair Value Estimate

Market Cap (Bil)

Tata Consultancy Services Ltd is an Information Technology

Price Versus Quantitative Fair Value

Quantitative Fair Value Estimate

Standard Deviation: 24.19

All Rel Sector Rel Country

Current 5-Yr Avg

Current 5-Yr Avg

Price/Quant Fair Value

Growth Per Share

Monthly Volume (Thousand Shares)

Financials (Fiscal Year in Mil)

Operating Cash Flow

Quarterly Revenue & EPS

Earnings Per Share

Revenue Growth Year On Year %

Morningstar Equity Research Methodology

Fair Value Estimate

Morningstar Equity Research Methodology

Quantitatively Driven Valuations

Understanding Differences Between Analyst

Morningstar Equity Analyst Report |Page 8 of 8

Tata Consultancy Services Ltd TCS (XNSE)