Over the last three years, Tata Consultancy Services had consistently traded at a valuation premium to Infosys except for a brief period in financial year 2016 when things were looking up for Infosys, after three straight quarters of earnings beat.
However, the trend of Infosys' outperformance seems to have been reversed now as the company today reported disappointing earnings for the April-June quarter and downward guidance revision.
TCS is now back to trading at a valuation premium over Infosys, and that valuation gap only seems to have widened after the Infosys stock fell sharply today.
TCS is now trading at a higher forward price-to-earnings ratio of 18.17 as compared to Infosys' forward PE ratio of 16.25.
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