While Teleperformance adjusted PE at around 5 appears attractive; several red flags emerges.

SalesForce, STP, AP, Concentrix etc. are all making AI agents. It seems quite likely these are going to ease away at TP’s market share as the technology improves. One might even consider a future with 90% of customer service being managed by agents. This will significantly affect revenue and margins in the mid term. Price is no longer hourly, but solution based. Currently TP’s situation is quite gloomy, but the fact is the technology is not there yet. Customers are still reluctant to talk with agents; and in generel human contact is in many cases needed.

TP’s mix of agents and humans, is the obvious choice at this stage.

My point is; TP is fairly priced at a slight 5% annual contraction in net income; Will grow faster or slower than that?

I won’t give TP any credit for their renewed focus on AI. That is because TP’s verticals and horizontals, are all developing agents. TP should focus on competencies and capabilities; and not entry a hyper competitive market. I think, Instead TP should treat their company as a cash cow – paying out their massive FCF; while growing in specialised customer care and streamlining operations. My biggest bear case, is they seem to be planning to focus on AI agents and expensive acquisitions instead.

Given previously points, it is actually not unlikely that net income is going to fall more than 5% a year. If adoption rates of agents increase anywhere near the current baseline, then TP’s revenue might fall 10% a year – or even significantly drop in 3-5 years time, when one of the many competitors solves agents for customer service. Revenue might even increase slightly or hold steady, but if capital expenditures exceed cost of capital, then whom cares … growth is unlikely to be organic.

to summarize

Mismatch between what management wants and shareholders – with a growth at any cost model. Valuation is somewhat fair given earnings outlook.

The company could be an attractive investment,
with a different strategic direction.

Don’t feed the dog, with the cash cow!
Let me invest the excess cash flow!.