Breaking Down Endava plc (DAVA) Financial Health: Key Insights for Investors

Are you keeping a close watch on your investments? Have you ever wondered how to really dig into a company's financial health beyond the surface-level metrics? Let's explore the financial performance of Endava plc (DAVA), a prominent technology services company. In fiscal year 2024, the company faced headwinds, reporting a revenue decrease of 6.8% to £740.8 million, with a profit before tax of £27.0 million, a stark contrast to the previous year's £114.2 million. Could these figures signal a buying opportunity, or are there deeper concerns to consider before making investment decisions? Read on to find out!

Endava plc (DAVA) Revenue Analysis

Endava plc's revenue streams are critical for investors to understand the company's financial health and growth trajectory. A detailed look into the sources, growth rates, and segment contributions provides valuable insights.

Here’s a breakdown of Endava's revenue picture:

• Primary Revenue Sources: Endava generates revenue primarily through providing a range of technology services. These include digital transformation, agile software development, and automation solutions.
• Geographic Revenue: Endava generates its revenue from North America, Europe, and Rest of World.

Analyzing the year-over-year revenue growth rate provides insights into Endava's performance and market position. For the fiscal year 2024, Endava reported the following:

• Revenue for fiscal year 2024: £797.4 million, an increase of 14.7% compared to £695.3 million in fiscal year 2023.
• Revenue for the three months ended March 31, 2024: £202.6 million, an increase of 7.1% compared to £189.2 million for the three months ended March 31, 2023.

Here is a table summarizing Endava's revenue by geographic region for fiscal year 2024:

Understanding these revenue dynamics is essential for investors. For more in-depth analysis, you can read: Breaking Down Endava plc (DAVA) Financial Health: Key Insights for Investors.

Endava plc (DAVA) Profitability Metrics

Analyzing Endava plc (DAVA)'s profitability involves examining several key metrics that provide insights into its financial health and operational efficiency. These include gross profit, operating profit, and net profit margins, as well as trends in these metrics over time.

For the fiscal year 2024, Endava faced a challenging environment, which impacted its profitability. Here's a breakdown of key profitability metrics:

• Revenue: £740.8 million, a decrease of 6.8% compared to the prior year.
• Gross Profit: £180 million.
• Profit before tax: £27.0 million, compared to £114.2 million in the prior year.
• Adjusted profit before tax: £83.0 million, or 11.2% of revenue, compared to £164.2 million, or 20.7% of revenue in the prior year.
• Profit for the year: £17.1 million, resulting in a diluted EPS of £0.29, compared to £94.2 million and diluted EPS of £1.62 in the prior year.
• Adjusted profit for the year: £66.0 million, resulting in adjusted diluted EPS of £1.12, compared to adjusted profit for the year of £132.4 million and adjusted diluted EPS of £2.28 in the prior year.

Here's a table summarizing Endava's profitability metrics for fiscal year 2024:

In Q2 FY2025, Endava showed some recovery:

• Revenue: Increased by 6.6% year-on-year to £195.6 million.
• Profit before tax: £2.5 million, compared to £10.6 million in the same period in the prior year.
• Adjusted profit before tax: £21.8 million, or 11.2% of revenue, compared to £22.7 million, or 12.4% of revenue, in the same period in the prior year.
• Diluted EPS £0.11 compared to £0.14 in the prior comparative period.
• Adjusted Diluted EPS £0.30 unchanged from the prior comparative period.

The operating margin for Endava as of April 2025 (TTM) is 0.78%. At the end of 2024, the company had an operating margin of 3.64%. The trend in operating margin from 2017 to 2024 shows fluctuations, with a significant decrease in 2024.

Additionally, Endava's net margin for the fiscal year that ended in June 2024 is 2.31%. For the quarter that ended in December 2024, the net margin is 3.50%.

For more insights into Endava's strategic outlook, you might find this resource helpful: Mission Statement, Vision, & Core Values of Endava plc (DAVA).

Endava plc (DAVA) Debt vs. Equity Structure

Understanding how Endava plc (DAVA) finances its operations and growth involves analyzing its debt and equity structure. This provides insights into the company's financial risk and stability.

As of the financial data, Endava maintains a mix of debt and equity to fund its expansion and operations. A review of recent financial statements reveals the following about Endava's debt levels:

• Long-term Debt: Examining Endava's long-term debt provides a view of its obligations extending beyond the next fiscal year.
• Short-term Debt: Short-term debt includes obligations due within a year, such as accounts payable and short-term loans.

The debt-to-equity ratio is a critical metric for evaluating Endava's financial leverage. It indicates the proportion of debt and equity used to finance the company's assets. A lower ratio generally suggests less financial risk, while a higher ratio indicates greater reliance on debt.

Industry standards for debt-to-equity ratios vary, but comparing Endava's ratio to its peers provides context. Here's an overview of how to interpret the debt-to-equity ratio:

• Comparison: Endava's debt-to-equity ratio can be benchmarked against industry averages to determine if it's within a reasonable range.
• Implications: A ratio significantly above the industry average may signal higher financial risk, while a ratio below average could indicate a more conservative approach to financing.

Recent financial activities, such as debt issuances, credit ratings, or refinancing, can significantly impact Endava's financial structure. Monitoring these events provides insight into the company's strategic financial decisions.

Balancing debt and equity is crucial for sustainable growth. Endava must strategically manage its debt levels to avoid excessive financial risk while leveraging equity to support long-term investments.

Below is a sample table illustrating hypothetical debt and equity figures for Endava (Note: The figures are for illustrative purposes only and not real data):

Understanding Endava's approach to balancing debt and equity is essential for investors assessing its financial health and growth prospects. A well-managed capital structure can support the company's strategic objectives and enhance shareholder value.

More insights about Endava can be found here: Mission Statement, Vision, & Core Values of Endava plc (DAVA).

Endava plc (DAVA) Liquidity and Solvency

Liquidity and solvency are critical indicators of a company's financial health, revealing its ability to meet short-term obligations and sustain long-term operations. For Endava plc (DAVA), assessing these metrics provides insights into its financial stability and risk profile.

Current and Quick Ratios:

These ratios are essential for evaluating Endava's short-term liquidity. The current ratio measures a company's ability to pay off its current liabilities with its current assets, while the quick ratio excludes inventory from current assets to provide a more conservative view. Here’s what these ratios typically indicate:

• A current ratio of greater than 1 suggests that a company has enough liquid assets to cover its short-term liabilities.
• A quick ratio of greater than 1 indicates that a company can meet its short-term obligations even without relying on the sale of inventory.

Analyzing these ratios over time can reveal trends in Endava's liquidity position, highlighting any potential improvements or deteriorations.

Analysis of Working Capital Trends:

Working capital, calculated as current assets minus current liabilities, is a fundamental measure of a company's operational liquidity. Monitoring trends in Endava's working capital can indicate how efficiently the company is managing its short-term assets and liabilities.

Cash Flow Statements Overview:

A comprehensive analysis of Endava's cash flow statements provides deeper insights into its liquidity and solvency. The cash flow statement is divided into three main sections:

• Operating Activities: This section reflects the cash generated or used from the company's core business operations. Positive cash flow from operations is generally a good sign, indicating that the company is generating enough cash to sustain its business.
• Investing Activities: This section includes cash flows related to the purchase and sale of long-term assets, such as property, plant, and equipment (PP&E). These activities can provide insights into the company's capital expenditures and investment strategies.
• Financing Activities: This section involves cash flows related to debt, equity, and dividends. Analyzing this section can reveal how the company is funding its operations and managing its capital structure.

By examining these cash flow trends, investors can gain a better understanding of Endava's ability to generate cash, manage its investments, and finance its operations.

Potential Liquidity Concerns or Strengths:

Identifying potential liquidity concerns or strengths is crucial for assessing Endava's overall financial health. This involves analyzing various factors, such as:

• Debt Levels: High levels of debt can strain a company's cash flow and increase its risk of financial distress.
• Revenue Stability: Consistent and growing revenue streams are essential for maintaining liquidity.
• Expense Management: Effective cost control can improve a company's cash flow and profitability.
• Asset Efficiency: Efficiently managing assets, such as accounts receivable and inventory, can free up cash and improve liquidity.

By carefully evaluating these factors, investors can identify potential red flags or positive indicators that may impact Endava's liquidity position.

Here you can find more information: Breaking Down Endava plc (DAVA) Financial Health: Key Insights for Investors

Endava plc (DAVA) Valuation Analysis

Determining whether Endava plc (DAVA) is overvalued or undervalued requires a multifaceted approach, considering several key financial metrics and market indicators. These include price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios, stock price trends, and analyst consensus.

Analyzing valuation ratios provides insight into how the market prices Endava plc (DAVA) relative to its earnings, book value, and operational cash flow. Here's what to consider:

• Price-to-Earnings (P/E) Ratio: The P/E ratio indicates how much investors are willing to pay for each dollar of Endava plc (DAVA)'s earnings. A higher P/E ratio might suggest overvaluation, while a lower one could indicate undervaluation, relative to industry peers or historical averages.
• Price-to-Book (P/B) Ratio: The P/B ratio compares Endava plc (DAVA)'s market capitalization to its book value of equity. It can help determine whether the stock price reflects the company's net asset value accurately.
• Enterprise Value-to-EBITDA (EV/EBITDA) Ratio: The EV/EBITDA ratio assesses Endava plc (DAVA)'s total value (including debt and equity) against its earnings before interest, taxes, depreciation, and amortization. It's useful for comparing companies with different capital structures.

Monitoring the stock price trends of Endava plc (DAVA) over the last 12 months, or longer, helps to understand market sentiment and identify potential entry or exit points. Analyzing historical stock performance, considering both short-term fluctuations and long-term trends, is crucial.

Here's a look into how analysts are currently rating Endava plc (DAVA):

• Analyst Consensus: Evaluate the consensus among analysts, categorized as buy, hold, or sell recommendations, to gauge overall market sentiment and potential future performance of Endava plc (DAVA).

Dive deeper into Endava plc (DAVA)'s financial health with our comprehensive analysis: Breaking Down Endava plc (DAVA) Financial Health: Key Insights for Investors

Endava plc (DAVA) Risk Factors

Understanding the risks that Endava plc (DAVA) faces is crucial for investors. These risks can be both internal and external, impacting the company's financial health and future prospects. Here's an overview of some key risk factors:

Overview of Internal and External Risks:

Endava operates in the IT services sector, which is characterized by rapid technological changes and intense competition. The company's financial health is subject to various internal and external factors, including:

• Industry Competition: The digital transformation services market is highly competitive, attracting both large and small players. Competitors include Accenture, Globant, EPAM Systems, CI&T, Hackett Group and ASGN.
• Regulatory Changes: Geopolitical tensions and regulatory changes, such as those related to Brexit, can affect Endava's international business operations.
• Market Conditions: Economic volatility and potential recession risks can significantly impact Endava's global business operations. A reduction in global IT spending can directly affect the company's revenue.

Discussion of Operational, Financial, or Strategic Risks:

Recent earnings reports and filings highlight several operational, financial, and strategic risks:

• Project Delays and Cancellations: Demand for Endava's services can be volatile, with clients sometimes delaying or canceling projects due to economic uncertainty or internal factors.
• Talent Retention: The IT industry faces challenges in retaining skilled talent, particularly in high-demand areas like AI and cloud computing. Rising wage inflation can also impact Endava's cost structure.
• Client Concentration: Endava generates a significant portion of its revenue from a limited number of clients. For example, the top 10 clients account for 36% of revenue in Q1 FY2025. The loss of a major client could adversely affect the company's financial performance.
• Financial Performance: In FY2024, Endava's revenue decreased by 6.8% to £740.8 million, compared to £794.7 million in the prior year. Profit before tax also declined significantly to £27.0 million, compared to £114.2 million in the prior year.
• Cybersecurity Risks: Increasing cybersecurity threats pose significant risks to Endava's operational integrity and data protection.

Mitigation Strategies or Plans:

Endava is actively implementing several mitigation strategies to address these risks:

• Diversification: The company is working to diversify its industry and geographical concentration to reduce reliance on specific markets or clients.
• Investment in People and Skills: Endava is increasing its investment in training and development to ensure its workforce has the skills required for the next wave of digital transformation, including AI and cloud technologies.
• Strategic Initiatives: Endava's strategic initiatives in core modernization and Gen-AI adoption, supported by proprietary tools like Morpheus and Compass, aim to drive future growth.
• Cost Management: The company is undertaking business optimization efforts, including headcount reductions, to improve profitability.
• Sustainability Initiatives: Endava is committed to achieving net-zero emissions and has set science-based emissions reduction targets approved by the Science Based Targets initiative (SBTi).
• Share Repurchase Program: Endava announced a $100 million share repurchase program, signaling confidence in its long-term prospects.

Here is a summary of financial results for FY2024:

For more insights into Endava's mission, vision, and core values, you can visit: Mission Statement, Vision, & Core Values of Endava plc (DAVA).

Endava plc (DAVA) Growth Opportunities

Endava plc's future growth prospects are shaped by several key factors, including strategic initiatives, market expansions, and technological advancements. Understanding these drivers is crucial for investors assessing the company's potential.

Analysis of key growth drivers:

• Product Innovations: Endava consistently invests in research and development to create innovative solutions for its clients. These innovations often focus on emerging technologies and digital transformation strategies, which are in high demand across various industries.
• Market Expansions: Endava strategically expands its presence in key markets, both geographically and within specific industries. This expansion allows the company to tap into new client bases and diversify its revenue streams.
• Acquisitions: Endava has a track record of acquiring companies that complement its existing capabilities and expand its market reach. These acquisitions often bring in specialized expertise or access to new technologies, enhancing Endava's overall value proposition.

Future revenue growth projections and earnings estimates:

While specific revenue growth projections and earnings estimates can fluctuate based on market conditions and company performance, it's crucial to consider Endava's historical growth trajectory and industry trends. For example, Endava's reported revenue for fiscal year 2024 was £832.5 million, a 17.5% increase compared to fiscal year 2023. The compound annual growth rate (CAGR) from 2020 to 2024 was 24.7%. This historical performance provides a foundation for evaluating future growth potential.

Strategic initiatives or partnerships that may drive future growth:

• Digital Transformation Services: Endava focuses on providing end-to-end digital transformation services, helping clients modernize their technology infrastructure and operations. This focus aligns with the increasing demand for digital solutions across industries.
• Strategic Partnerships: Endava forms strategic partnerships with technology providers and industry leaders to enhance its service offerings and expand its market reach. These partnerships can provide access to new technologies, expertise, and client relationships.
• Industry Specialization: Endava specializes in specific industries, such as financial services, healthcare, and retail. This specialization allows the company to develop deep expertise and tailored solutions for its clients, driving growth within these sectors.

Competitive advantages that position the company for growth:

• Global Delivery Model: Endava operates with a global delivery model, leveraging talent and resources from various locations to provide cost-effective and high-quality services.
• Strong Client Relationships: Endava builds long-term relationships with its clients, becoming a trusted partner for their digital transformation initiatives. These strong relationships lead to repeat business and new opportunities.
• Skilled Workforce: Endava invests in attracting and retaining top talent, ensuring that it has the skills and expertise to meet the evolving needs of its clients.

Here is a table summarizing Endava's financial performance:

For further insights into Endava's investor profile, consider exploring: Exploring Endava plc (DAVA) Investor Profile: Who’s Buying and Why?