Globant S.A. (GLOB)

By both methods, the value today (DCF $108 · Multiples $60) exceeds the market price ($36).

Today — with margin of safety: at $36 trades ~39.1% below its value discounted to today (~$60) — the wide discount we require (≥38%, equivalent to a ~15% annual return); the risk is covered by the margin, not the rate.

At 5 years — Muy infravalorado: the target price ($75) plus dividends yield above the required average return (10%) — the business compounds.

The bridge: the return at 5 years comfortably exceeds the risk-free rate (4.5%) — and the discount reaches the required margin of safety.

Educational / informational. Does not constitute investment advice.

The inverse approach: instead of projecting growth to obtain the value, the market price ($36) is taken as given and it solves for what annual owner-earnings growth would need to hold for 5 years for the present value —at the method's rate (4.5%, no-growth terminal)— to equal that price. It is the disconfirmation test: the expectations the price already pays for, contrasted against the method's projection.

The market discounts less growth (-16.6%/year) than we project (6.0%/year) → if the base case holds, there is margin: perception is more pessimistic than the estimated reality.

That growth implies ~$0.1 bn of owner earnings in year 5 (vs ~$0.2 bn of our base case). It recalculates if the DCF assumptions are edited.

Year-by-year projection of the selected scenario. From each year, two versions of the flow are derived: growth FCF (operating flow − total capex, the cash surplus) and maintenance FCF (the owner earnings: what the business yields if it only sustains its capacity). The flow is returned almost in full (dividend + buyback) or redeployed into the operation, so that EV stays roughly flat and multiples compress because the metric grows, not because of cash accumulation. The valuation is done on Resultado operativo (EV/EBIT). In edit mode, revenue, margins, capex, and exit multiples can be adjusted.

Year 0 = the year ended 31-Dec-2025 (TTM = FY2025, an annual 20-F filer). The year-0 net margin is normalised: the US$52.0 million of the Business Optimization Plan (severance plus office closures, started April 2025, charged in operating income) is removed — normalised net income of US$141.8 million on revenue of US$2,454.9 million = a 5.77% margin, against the 4.19% the unadjusted reported figure would give. Re-anchoring to guidance (§5 R1 previa): year 1 (+1a) does not come from the filing's trajectory but from the Q2 2026 results 6-K (filed 13-Aug-2026, accession number 0001104659-26-095916, exhibit 99.1), which the automatic search had not been able to identify because Globant seals the period of its routine 6-K filings. Revenue guidance for 2026 is US$2,428 to US$2,462 million (−1.1% to +0.3% year over year); year 1 uses the midpoint, US$2,445 million (−0.4%). The adverse and favourable scenarios anchor at the extremes of that same guided range: adverse US$2,428 million (−1.1%, the floor of the guidance), favourable US$2,462 million (+0.3%, the ceiling). The guided operating margin (13.5%-14.5%) is non-IFRS and excludes share-based compensation, amortisation of acquired intangibles and acquisition charges as well as the optimisation costs — it is not comparable with the IFRS margin the model runs on, so it is not copied across directly. The half-year already closed (H1-2026) gives an IFRS operating margin of 5.86% that rises to ~8.5% if only the optimisation costs are excluded (US$32.3 million, charged entirely in the second quarter) — that is the reference anchoring the year-1 margin (8.6%), slightly below the 9.11% normalised year-0 figure, with gradual recovery towards 10.5% at year 5 as the optimisation plan reduces the cost base and the fixed-price contract mix (28.0% of revenue in 2025, and rising) stabilises pricing. The revenue path takes the shape of a trough and recovery (a fall in year 1, gradual acceleration afterwards) — stated here by invoking the rebound exception of R3: there is no guidance beyond 2026, so years 2-5 are the trajectory of a reasonable reversion after a year of stagnation, not an optimistic extrapolation without support. Year-0 D&A (US$187.8 million: depreciation of property and equipment US$33.7 million + depreciation of right-of-use assets US$32.9 million + amortisation of acquired intangibles US$121.3 million) is dominated by the amortisation of intangibles from past acquisitions (Pentalog, Exusia, Blankfactor, Omni.Pro, among others) and decays gradually in the absence of significant new M&A. Maintenance capital expenditure = total capital expenditure (US$89.5 million, property and equipment plus intangibles): with flat or contracting revenue in year 1, the Greenwald test (growth capital expenditure approximated by Δsales times fixed assets over sales) gives practically zero growth capital expenditure — almost all of it is replacement. Year-0 ΔNWC (US$73.6 million, an increase that consumes cash) arises mainly from the fall in payroll and social security payables (−US$60.8 million) — normal in a year of headcount reduction with settlement of labour liabilities. It is valued at the enterprise level: the multiple goes on operating income and the cash (US$250.3 million) and the gross financial debt (US$366.7 million) enter the enterprise-value-to-equity bridge, instead of being buried inside a multiple on earnings. Return on capital: XBRL does not carry equity under the standard tag — it was read directly from the 20-F balance sheet: total equity, including non-controlling interests, US$2,161.6 million. Invested capital = equity + debt − cash = US$2,297.7 million. Normalised NOPAT (normalised EBIT of US$223.7 million times (1 minus 25.3%)) = US$167.1 million. The level of return on capital comes to 7.27%, below the 10% hurdle — consistent with the pattern of a serial acquirer (invested capital carries the goodwill and intangibles of accumulated acquisitions in the denominator; the numerator does not yet offset that weight). The incremental figure is omitted: there is no verified second observation of invested capital from a year earlier with which to compute it without inventing one.

Today's elevated multiple is the price of growth: if the business grows, the entry point cheapens on its own going forward (the metric grows while EV stays roughly flat). The exit multiple at 3 years is higher than the terminal at 5 years —at 3 years there is more growth still ahead—, so the value curve shows whether value creation is concentrated in the early or the later years. The required return is applied to the base scenario.

They are valued separately, with their own rationale, and are not incorporated into the base or the verdict (they are excess return). When assigning them value — in Editmode —, the total with optionalities updates live, without moving the base.

The verdict, the base CAGR, and the margin of safety are always calculated on the base; optionalities do not alter them (with optionalities at $0 they do not move).

Each card fixes a required annual return and answers: if the business is worth $75 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $36, the margin of safety is how much cheaper the market is than that maximum. The three thresholds: 4% covers inflation (the floor), 10% is the long-term average return, and 15% is the level of a great investment.

With a target price of $75 in 5 years and a required return of 4.5% annually, the maximum to pay today is $60. Against the current market price ($36), the margin of safety is 39.1% (trades below the maximum → there is margin) and the total return at that price would be 15.4% annually.

• Decline in the stock. A decline with an identified catalyst in the guidance.
• Exit multiple. 11.5x at the low end of the IT services archetype band (11x-14x).
• Adverse scenario. The adverse case nearly matches the current price — little additional modeled downside.
• Dependence on a rebound. The base case depends on a growth recovery not guaranteed by any guidance beyond 2026.

Each margin over sales, year by year: historical (solid line) → projection (dotted).

• ✕ ROIC exceeds the cost of capital (~10%)
• ✓ CFROIC backs up the ROIC (141%, cash vs. accruals)
• ✓ Healthy balance sheet (low corporate debt)
• ✓ Durable competitive moat (multiple advantages)

• Cash generation. Positive free cash flow (US$211.7 million LTM) despite the revenue slowdown.
• Return on invested capital. 7.27%, below the 10% bar, partly due to goodwill from acquisitions.
• Cash conversion. Free cash flow exceeds reported net income over the LTM.
• Earnings quality. 2025 reported earnings carry US$52.0 million of non-recurring restructuring costs.

Annual levels from the official filing (10-K); the % over each bar is the year-over-year (YoY) growth vs the prior year.

Globant does not report GMV, TPV, or a credit portfolio: the relevant operating drivers for a professional services business are billable headcount, contract mix (time-and-materials versus fixed-price, which changes the risk profile of each revenue dollar), and talent retention (employee turnover), the central productive input for a business that sells engineering hours.

The % are the annual (year-over-year) growth: each year —historical and projected— vs the prior one; the TTM (trailing 12m) vs the TTM of a year ago, to avoid overlapping windows. The historicals are exact figures from the official filings; the projected years come from the year-by-year model (the intermediate years without their own series are interpolated between the anchors). The projected columns (+1y…+5y) are 12-month windows counted from the TTM close (31-dic-2025): the projection starts from the most recently reported data, not the fiscal year. The projected base is realistic and unbiased — the risk discount is applied at the end, via the required return. The rationale for each metric is in the (i).

• Deceleration. From high-single-to-double-digit rates to negative guidance in two years — the sharpest in the company's history as a public company.
• RPO / backlog. Not applicable: Globant does not report remaining performance obligations or contracted backlog.
• Contract mix. Fixed-price contracts rise from 18.3% (2023) to 28.0% (2025), providing more predictability.
• Proprietary AI optionality. AI Pods and Globant Enterprise AI are an early attempt to monetize the investment in the proprietary platform.

• Client retention. 96.0% of revenue from recurring clients in 2025, up from 89.6% in 2023.
• Client concentration. The ten largest clients weigh 29.2% of revenue; the largest, 8.7%.
• Recent growth. From +17.7% (2023) to +1.6% (2025) and negative guidance for 2026.
• Industry diversification. No vertical exceeds 21% of revenue, but three concentrate 59.3%.

Not all debt is equal: only the structural needs refinancing; the rest is operational (self-liquidating).

Structural debt is what is exposed to the contraction phase of the cycle; operational debt (leases, matched funding) self-liquidates with the business.

• ✓Leverage (net debt / EBITDA)Net cash $0 bn
• ✓Interest coverage (EBIT / interest)10.8x
• –Liquidity (current ratio)no data
• ✓Cash quality (CFROIC vs ROIC)CFROIC backs 141% of ROIC
• ✕Value creation (ROIC − 10% bar)-3pp
• ✓Malinvestment test (capex vs incremental ROIC)Capex/D&A 0.5x — no over-investment
• !Float / working capitalConsumes cash $0.1 bn (positive WC)
• !Dilution (SBC % of revenue + shares)SBC 3.1% of revenue

A traffic-light interpreted by the method (not generic): float (negative WC) adds up, capex is judged by incremental ROIC (malinvestment test), and a lender is not subjected to corporate solvency. The (i) shows the derivation of each number.

• Leverage. Moderate net debt (~US$136 million) against a market value of ~US$1.8 billion.
• Liquidity. Cash and equivalents of US$250.3 million comfortably cover short-term debt (US$19.7 million).
• M&A commitments. Earn-outs and call options over noncontrolling interests from past acquisitions pressure cash flow.
• Cash flow generation. Positive free cash flow despite the revenue slowdown and ongoing restructuring.

• Leadership continuity. Founder-CEO since 2003, more than two decades leading the company.
• Ownership transparency. No DEF 14A as a foreign private issuer; founder ownership detail is not available.
• Capital allocation. Splits cash flow among replacement capex, buybacks, and acquisitions, with no dividend.
• Candor about results. The filing explicitly admits it did not achieve the anticipated growth in recent periods.

• The company guided its first year-over-year revenue decline since the 2014 IPO, after years of high-single-to-double-digit growth — an expectations break that triggers motivated selling from growth investors who no longer see the stock fitting their profile.
• The Business Optimization Plan (headcount reduction and restructuring costs of US$52.0 million in 2025 and another US$32.3 million in the first half of 2026) depresses reported earnings beyond the actual deterioration of the underlying business, and is read — with partial justification — as confirmation of structural weakness.
• The market treats IT services providers as a block equally exposed to demand disruption from generative AI, without necessarily distinguishing the depth of Globant's client relationships (96% recurring revenue) from more transactional competitors.

The stock's decline has an identifiable catalyst: the second-quarter 2026 revenue guidance confirms the first year-over-year contraction in the company's history as a public company. The relevant question is not whether there is a cause for the punishment — there is, and it's in the company's own communication — but whether the market is treating a one- or two-year trough as if it were permanent decline from structural AI disruption.

The annual return (CAGR at 5 years) in each scenario, with the total period return below — the margin of safety made visual: upside range wide, downside range narrow.

Even in the bear scenario, the return holds at +6%/year (+36% total): the margin of safety protects the downside. The bull (+25%/year, +202% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• AI disruption. Underlying structural risk: generative AI may reduce demand for outsourced development hours.
• Talent retention. Employee turnover on a sustained rise (8.1% to 13.6% over three years).
• Client concentration. The ten largest clients weigh 29.2% of revenue.
• Labor cost pressure. Wage inflation in delivery countries (Argentina, Colombia, Mexico, India) that does not always pass through to rates.
• M&A financial commitments. Debt and earn-outs from past acquisitions pressure cash flow in a year of stalled growth.

Each thinker's analytical framework applied to our data.

• Buffett / Graham Quality + margin of safety

  Fails the quality gate: narrow moat, eroding.

• Peter Lynch Growth at a reasonable price (GARP)

  A stalwart growing 6% at a multiple/growth of 1.3 → reasonable for its growth.

• Joel Greenblatt Cheap and high-return (Magic Formula)

  Earnings yield 14% (EBIT/EV) + ROIC 7% → falls outside the Magic Formula.

• Howard Marks Perception vs reality + cycle

  The price discounts -17% vs our 6%: perception is more pessimistic than reality, with an identified source of the discount.

• Seth Klarman Capital protection (bear scenario)

  Bear-scenario floor +6%/yr, bull-scenario ceiling +25%/yr over 5y and a +39% margin → capital protected, asymmetry in your favor.

• Pat Dorsey Moat strength (Five Rules)

  A narrow moat, eroding; sources: intangibles, switching costs, efficient scale → fails the Five Rules.

• Aswath Damodaran Expectations implied by the price

  Justifying the price requires discounting -17%, within what we project (6%) — the story squares with the numbers.