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Epam Systems (EPAM): analysis traps
Where its figures could mislead a reader, and what to check before taking them at face value · Data: Q3 2026, to Sep 30, 2026, filed Nov 5, 2026; rules v1.1
Epam Systems (EPAM): 1 rule of 10 triggered on the filings to Sep 30, 2026: FCF growth = the business improved. 1 to review; 3 with insufficient data; 2 not applicable. Each is a question to verify, with the normal explanation that would produce the same figures.
Check these first
FCF growth = the business improved Triggered · severity high · confidence medium
Free cash flow rose $86M (+16%), from $527M to $613M, but working capital released $149M more cash than the year before: more than the whole increase came from sources that need not repeat. Operating cash flow before working capital fell by $53M.
Innocent reading: An expansion programme finished, so capex fell back to maintenance levels for good.
A precise DCF value = the true value To review · confidence high
The DCF's point value is 146.81 a share (price 156.62); 68% of it is the terminal value, a number about years no one has seen. Moving operating margin by ±3 pts alone takes it from 111.08 to 182.54; across every method the research ran the range is 17 to 780. The value is a range; the decimals are not information.
Innocent reading: A stable, mature business with a narrow range of outcomes, where the point value is a fair summary.
Every rule
A01 FCF growth = the business improved Triggered severity high · confidence medium
Free cash flow rose $86M (+16%), from $527M to $613M, but working capital released $149M more cash than the year before: more than the whole increase came from sources that need not repeat. Operating cash flow before working capital fell by $53M.
The figures and how they are read
| Fiscal year before | FY2024 |
| Fiscal year | FY2025 |
| Operating cash flow, year before | $559M |
| Operating cash flow | $655M |
| Capex, year before | $32M |
| Capex | $42M |
| Free cash flow, year before | $527M |
| Free cash flow | $613M |
| Change in FCF | $86M |
| Change in capex | $10M |
| Working capital: change in its cash contribution | $149M |
| Of which: capex cut | 0.00 |
| Of which: working capital released | $149M |
| Share of the increase that need not repeat | +173.4% |
| Operating cash flow before working capital: change | -52808000.00 |
FCF = operating cash flow − cash capex; ΔFCF = ΔOCF − ΔCapEx; the working-capital part is the change in the cash-bridge items (receivables, inventory, payables, accruals), with the sign of the cash flow statement
Source: FY2025 (cash flow statement, fiscal year) · FY2024 (cash flow statement, fiscal year before)
What would explain it innocently
- An expansion programme finished, so capex fell back to maintenance levels for good
- Suppliers agreed longer payment terms in a contract
- Inventory was brought down after a glut and will stay down
What to look for in the filing
- Maintenance capex (what it costs to keep the assets working)
- Supplier payment terms and any supply-chain financing
- Management's capex guidance for next year
What would show the trap does not apply
- Next year's FCF holds or rises with capex back at its earlier level and working capital no longer releasing cash
- The 10-K's capex guidance and the segment capex show the cut is a completed programme, not deferral
- The working-capital release matches a disclosed change in terms or a divestiture, not stretched payables or a collection push
Look again: next filing.
A07 Stock compensation added back = no economic cost Not triggered confidence high
Stock compensation is 3.2% of revenue, but buybacks of $662M covered it (3.7×) and the diluted share count fell 3.0%: the dilution has been paid for in cash.
The figures and how they are read
| Fiscal year | FY2025 |
| Stock compensation | $177M |
| Revenue | $5.5B |
| SBC / revenue | +3.2% |
| Buybacks | $662M |
| Buybacks / SBC | 3.8 |
| Diluted shares, year before | 58.0M shares |
| Diluted shares | 56.2M shares |
| Diluted shares: change | -3.0% |
SBC / revenue from the cash flow statement's add-back; the diluted weighted share count year over year; buybacks from the financing section
Source: FY2025 (stock compensation, buybacks and the diluted share count, fiscal year)
B02 Receivables growing = future cash is certain Insufficient data
fewer than five quarters with receivables and revenue on file (a year-over-year comparison needs five)
B08 Adjusted profit = economic profit Insufficient data
no reconciliation table read from the releases yet and fewer than three quarters with both an adjusted and a GAAP EPS
C02 Low net debt = no refinancing risk Insufficient data
neither a maturity table nor the current portion of debt is on file
D03 EPS growth = profit growth Not triggered confidence high
EPS rose 32% and net income rose 22% in Q3 2026; the share count fell 7.8%: EPS growth follows profit growth.
The figures and how they are read
| Quarter | Q3 2026 |
| Quarter before | Q3 2025 |
| EPS, year before | $1.91 |
| EPS | $2.53 |
| Net income, year before | $107M |
| Net income | $130M |
| Diluted shares, year before | 55.8M shares |
| Diluted shares | 51.5M shares |
| EPS growth | +32.3% |
| Net income growth | +22.0% |
| Diluted shares: change | -7.8% |
| eps from profit | $0.42 |
| eps from share count | $0.20 |
EPS and net income against the same quarter a year earlier; the EPS bridge attributes the change to profit first, then to the share count (the order is fixed and disclosed)
Source: Q3 2026 (net income, diluted shares, EPS) · Q3 2025 (the same quarter a year earlier)
E02 Low P/E at a cyclical peak = undervalued Not triggered confidence medium
Net income of $425M is not at a cyclical high against the last eight years (median $417M, best $482M): the P/E of 19.0× is on a normal year.
The figures and how they are read
| market value | $8.1B |
| net income ttm | $425M |
| pe ttm | 19.00 |
| net income median fy | $417M |
| pe mid cycle | 19.30 |
| net income peak fy | $482M |
| years | FY2018 / 240.0; FY2019 / 261.0; FY2020 / 327.0; FY2021 / 482.0; FY2022 / 419.0; FY2023 / 417.0; FY2024 / 455.0; FY2025 / 378.0 |
| down years in window | 3 |
P/E on the trailing twelve months' net income against the P/E on the median net income of the last eight fiscal years (a mid-cycle stand-in); 'at a peak' = this year's profit at or above 90% of the best year and at least 1.3× the median
Source: Q3 2026 (net income, trailing twelve months)
E07 A precise DCF value = the true value To review confidence high
The DCF's point value is 146.81 a share (price 156.62); 68% of it is the terminal value, a number about years no one has seen. Moving operating margin by ±3 pts alone takes it from 111.08 to 182.54; across every method the research ran the range is 17 to 780. The value is a range; the decimals are not information.
The figures and how they are read
| dcf value | 146.81 |
| price | 156.62 |
| terminal value share | +67.9% |
| swing by input | Operating margin / ±3 pts / 111.08 / 182.54; Revenue growth (each year) / ±5 pts / 124.57 / 173.32; WACC / ±1 pt / 131.25 / 167.6; Tax rate / ±5 pts / 138.25 / 155.38 |
| range all methods | 16.75; 780.09 |
the DCF's point value against the share of it that is the terminal value and the value at each input moved by one step (growth ±5 pts, WACC ±1 pt, margin ±3 pts …); the range across every method the research ran
Source: 2026-11-08 (valuation research)
What would explain it innocently
- A stable, mature business with a narrow range of outcomes, where the point value is a fair summary
- The inputs that matter most are themselves well known (a regulated return, a long contract)
What to look for in the filing
- Which input you believe differs from the research's and why
- What the price implies for growth (the reverse DCF on the fair-value page)
What would show the trap does not apply
- The DCF's value is robust to the terminal growth and discount rate (the range's low end is still above the price)
- The company's cash flows over the next three years track the DCF's early years
Look again: next filing.
J06 A bank's low P/E and high profit = safe Not applicable
not a bank
J08 A REIT's low net income = the dividend is unsafe Not applicable
not a REIT
What the statuses mean
Triggered: the filings show the pattern; read the normal explanations and the missing evidence before concluding anything. To review: one quarter or a weak signal; a reader's judgement, not a pattern. Not triggered: the pattern is absent on these figures. Insufficient data: the filings read so far do not hold what the rule needs; this is not a clean bill. Not applicable: the rule is not meant for this kind of company (a bank's working capital, a loss-making quarter's EPS growth). Out of date: the latest filing is more than fifteen months old.
Severity is what the pattern could mean for cash, value or solvency; confidence is how reliable the inputs and the reading are. The two are kept apart.
Record a view
A reader's judgement, grounds, what would change it and the next review; kept in the browser (needs JavaScript).
Every rule and the companies it triggers on → Epam Systems: cash flow → Earnings quality score →
Each rule reads the company's own filings by a fixed formula and says what would explain the same figures innocently. A triggered rule is a question to verify, not a finding of manipulation, and not a view on the stock. Missing data is shown as missing, never as clear. Not investment advice.