QS Research · Michael Burry's Scion Capital analyst template · 2006
EPAM Systems, Inc. (EPAM)
As of 2026-11-11 · 12/15 boxes filled from SEC filings and market data
Report price $164.14 (close 2026-11-10)
Conclusion: PASS
Conviction low · base case -20% · downside -24% · upside +15%
EPAM is a post-deal, cash-generative business: TTM to Sep 30 2026 revenue $5.65B, GAAP EBITDA $721.2M, net cash $940.2M and FCF $470.4M (N11, N14, N23, N18), with ROIC 15.7% against a 9.5% WACC (N45, N46). But the growth engine has stalled: FY2025 revenue grew 15.4% (N41) while Q3 2026 grew 2.3% and Q4 2026 is guided to (0.2)% to 0.9% (S31, S102), and the February 2026 NEORIS customer ramp-down (S73) is a permanent loss, not a cycle. At today's 19.7x P/E and 10.3x EV/EBITDA (GAAP EBITDA, TTM; N30, N27) the stock is not cheap enough to compensate: the independent peer-median P/E anchor of 15.75x gives a base case of $131.23, -20.1% (N60), the 16.74x P/E downside gives -23.6% ($125.42), and the P/E upside gives +15.0% ($188.76), for a reward/risk of 0.64. The $1.8B buyback and 8.1% net buyback yield (N49) are real supports, but stock pay at 39% of FCF (N44) and a crowded short at 13.0% of float (N52) cut both ways. Call: pass, low conviction.
Key numbers
- Share price: $164.14
- Market cap: $8.37B
- Latest financial period: TTM to Sep 30, 2026
- Revenue (TTM): $5.65B
- EV / EBITDA (TTM): 10.3x
- P/E (TTM): 19.7x
- FCF yield: 5.6%
- Price / book: 2.33x
- Earnings-quality flags (TTM): none flagged
- EV / FCF (TTM): 15.8x
- Revenue growth (latest fiscal year): +15.4%
- ROIC (TTM): 15.7%
- WACC: 9.5%
- Economic profit spread: +6.2 pts
The 15 boxes
- ✓ 1. Long-form business notes
EPAM sells digital engineering, cloud and AI-enabled transformation services, plus consulting/design and cybersecurity, to clients in five main verticals; delivery is through a global on-site/off-site/offshore model with about 56,600 delivery professionals at Dec 31, 2025. From FY2020 to FY2025 revenue rose from $2.66B to $5.46B and operating income from $379.3M to $520.0M, while top-five client concentration fell from 22.0% to 13.7% and the 10-K language moved toward end-to-end AI-native transformation. TTM to Sep 2026 revenue was $5.65B, operating income $594.2M, net income to common $425.2M, operating cash flow $532.9M and buybacks $712.4M.
- ✓ 2. Competitive advantage
EPAM's own 10-K claims a global delivery model, 56,600 delivery personnel and end-to-end AI-native delivery as key advantages, and 64.4% of FY2025 revenue came from clients of five years or more. But the record does not show pricing power: FY2025 revenue was $5.46B while operating income was $520.0M and net income to common was $377.7M, below FY2024's $544.6M and $454.5M; TTM to Sep 2026 recovered to $594.2M operating income. It competes with Accenture, Capgemini, Cognizant, Infosys, TCS, Wipro, Globant, Endava and others, and the 2026 10-K's computed risk-factor diff flags AI-based tools as a demand risk.
- ✓ 3. 10-Q takeaways
Q3 2026 (quarter ended 2026-09-30, reported 2026-11-05) revenues were $1.426B, up 2.3% year over year and 2.5% on an organic constant currency basis, with GAAP operating margin expanding to 12.3% from 10.4% and non-GAAP to 16.7% from 16.0%; GAAP diluted EPS was $2.53 versus $1.91. Nine-month totals are $4.241B of revenue (+4.7%), GAAP operating margin 10.5% versus 9.2%, GAAP EPS $6.00 versus $4.75. Cash is the soft spot: nine-month operating cash flow fell to $250.1M from $372.0M on 2025-performance variable comp payments and a bigger DSO build, while $488.9M went out the door on buybacks (including the $300M March 2026 ASR and ~$80M in Q3). Management raised/restated FY2026 guidance to 3.5%-3.7% revenue growth, GAAP EPS $8.41-$8.49 and non-GAAP EPS $13.23-$13.31, and authorized a new $1.8B repurchase program plus a $500M Q4 ASR.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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