Persistent Systems Limited

“Persistent Systems is a high-quality Indian IT engineering services compounder — 24-25% revenue growth, expanding margins, pristine balance sheet, founder-aligned management, and AI-first positioning in a structurally growing market. The business earns well above its cost of capital and has a decade of reinvestment runway. However, at 41.8x trailing P/E and ~50x FCF, the valuation leaves no margin of safety and embeds heroic forward earnings assumptions. The one credible structural risk — AI-driven labor compression reducing the billable content of software engineering — is not priced in at all. The right action is to track for a better entry around 32-35x forward earnings rather than initiate a meaningful position today.”