Stock Analysis & Valuation Nagarro SE (NA9.DE)

• Previous Close: €70.75
• Sector Valuation Confidence Level: Low

Valuation method	Value, €	Upside, %
Artificial intelligence (AI)	71.99	2
Intrinsic value (DCF)	54.96	-22
Graham-Dodd Method	19.08	-73
Graham Formula	53.29	-25

Strategic Investment Analysis

Company Overview

Nagarro SE is a leading digital engineering and technology solutions provider headquartered in Munich, Germany. Founded in 1996, the company specializes in agile development, API management, AI, data analytics, cloud solutions, CRM, digital commerce, IoT, and enterprise modernization. Nagarro serves a diverse clientele across industries such as automotive, banking, healthcare, retail, and telecom, operating in North America, Central Europe, and globally. With a strong focus on digital transformation, Nagarro helps businesses enhance operational efficiency and customer engagement through cutting-edge technology. The company’s expertise in end-to-end digital engineering positions it as a key player in the IT services sector, catering to enterprises seeking scalable and innovative solutions. Nagarro’s broad service portfolio and industry-specific knowledge make it a trusted partner for digital innovation.

Investment Summary

Nagarro SE presents a compelling investment case with its strong revenue growth (€912 million in FY 2023) and solid profitability (net income of €52.1 million). The company’s diversified service offerings and global presence mitigate sector-specific risks, while its focus on high-demand digital transformation services ensures long-term relevance. However, investors should note its high beta (1.597), indicating higher volatility relative to the market. Nagarro’s debt-to-equity ratio and competitive pressures in the IT services sector could pose risks. The dividend yield (€1.92 per share) adds appeal for income-focused investors. Overall, Nagarro is well-positioned in the growing digital engineering space but faces challenges from larger competitors and macroeconomic uncertainties.

Competitive Analysis

Nagarro SE competes in the highly fragmented IT services and digital engineering market, where differentiation through specialized expertise and scalability is critical. The company’s competitive advantage lies in its agile delivery model, deep industry knowledge, and ability to integrate emerging technologies like AI and blockchain into client solutions. Unlike larger IT service providers, Nagarro focuses on mid-market and enterprise clients, offering tailored solutions rather than standardized services. However, it faces intense competition from global giants like Accenture and Infosys, which have broader resources and established client networks. Nagarro’s European base provides regional strength but limits its dominance in North America and Asia-Pacific markets. Its relatively smaller scale may hinder large-scale digital transformation projects compared to tier-1 players. Nevertheless, Nagarro’s niche expertise in sectors like automotive and healthcare allows it to command premium pricing and foster long-term client relationships. The company must continue investing in R&D and talent retention to maintain its competitive edge against both global and boutique competitors.

Major Competitors

• Accenture plc (ACN): Accenture is a global leader in IT services and consulting, with a vast client base and extensive resources. Its scale and brand recognition give it an edge in large-scale digital transformation projects, but its standardized offerings may lack the agility and customization that Nagarro provides. Accenture’s higher pricing could make Nagarro a more cost-effective alternative for mid-market clients.
• Infosys Limited (INFY.NS): Infosys excels in offshore IT services, offering cost advantages due to its India-based operations. While it competes with Nagarro in digital engineering, its broader focus on outsourcing may limit its specialization in niche sectors. Nagarro’s European presence and agile methodologies provide differentiation, but Infosys’s larger scale benefits economies of scope.
• Cognizant Technology Solutions (CTSH): Cognizant is a strong competitor in digital services, particularly in North America. Its healthcare and financial services expertise overlaps with Nagarro’s offerings. However, Nagarro’s European footprint and SME focus provide regional diversification, whereas Cognizant’s reliance on large enterprises exposes it to cyclical demand fluctuations.
• Wipro Limited (WIT): Wipro competes in IT services and consulting, with strengths in cloud and AI solutions. Its India-centric delivery model offers cost efficiencies but may lack the proximity advantages of Nagarro’s European operations. Nagarro’s industry-specific solutions could appeal to clients seeking specialized expertise over Wipro’s broader but less tailored services.
• LTI Mindtree (LTIM.NS): LTI Mindtree combines digital engineering and IT services, similar to Nagarro. Its stronghold in India and partnerships with tech giants provide scalability, but Nagarro’s European client base and agile approach may be preferable for regional businesses. Both compete in AI and cloud, but Nagarro’s vertical focus could differentiate it in key industries.