Zen Technologies is an Indian company that designs, develops, and manufactures state-of-the-art training simulators. What is its current position in the market, and what are the prospects for Zen Technologies’ share price?
Zen Technologies – what kind of enterprise is it? (Company profile)
It is an India-based native company that specializes in the design, development, and production of military and combat training equipment and systems. It also specializes in simulation solutions for military and law enforcement organizations worldwide.
Established in 1993, the company has already three decades of experience in the defense industry. Since its first appearance on the market, it has built a solid reputation for delivering cutting-edge technology and innovative solutions to its clients.
The company’s core areas of expertise include weapon training simulators, driving simulators, virtual reality and augmented reality-based training, and software development.
With its headquarters in Hyderabad, India, Zen Technologies has a global footprint with customers across Asia, Africa, Europe, and the Americas. The company is committed to providing its customers with state-of-the-art training solutions that are cost-effective, realistic, and customizable to meet their specific needs.
What are the prospects for Zen Technologies’ share price?
It runs well on the stock market: its share price has grown by 24,55 % over the last month and now is valued at 291.75 INR (as of March 14, 2023). The company also hit a record high in February 2023. But what are the future perspectives for this company? Will it maintain its growth?
Even if the growth in the stock market may seem optimistic, it is useful to evaluate other metrics. The ROE (Return on Equity) based on the trailing twelve months to December 2022 Zen is 11 percent. It shows how effectively a company is growing its value and how profitable it is in relation to investors’ capital. Zen’s ROE is comparable to the industry average of 11%.
Another metric we may look to is its past 5-year annual earnings growth. Zen Technologies’ income declined by 23% annually. That’s a somewhat disappointing value, especially given the industry’s average growth of 29% in the same period.
One more number we may notice is a low three-year median payout ratio of 15%. That means Zen Technologies retains most of its earnings. That should mean the company should grow.
A year-over-year revenue change in Dec. 2022 was +100.18%, which is a good indicator. Other positive indicators: the company is almost debt-free. Meanwhile, EV / EBITDA ratio currently is around 40, which could be lower. But it has declined since its peak value in Feb. 2022 when it reached 260.1, which is a good trend.
For Q3FY23, Zen Technologies reported strong growth of consolidated profit after tax (PAT), which was valued at Rs 11.94 crore. During the same period last year, it recorded a loss of Rs 0.22 crore. During the last year, sales of the company products and services more than tripled (Rs 52.48 crore vs. Rs 16.26 crore a year before).
Final thoughts (Buy or Not to buy Zen Technologies shares)
To sum up, Zen Technologies has a relatively low ROE and underperforming growth of income compared to the industry average. Therefore, it would be wise to look at the company’s future perspectives with a bit of caution. However, the growth of sales has been strong over the last few months, even if it is not amongst market leaders according to this criteria.
Furthermore, India’s government has been recently aiming to increase its military funding. With this in mind, Zen Technologies also expects to win new large state-backed orders which could significantly improve the economic standing of this enterprise. Considering these facts, Zen Technologies shares could be an interesting and profitable investment option.
Written by Giedrius Pakalka and Alius Noreika
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