EPAM Systems (EPAM) should take steps to address what Engine Capital called a "substantial valuation discount" and prolonged share-price underperformance, the investment firm said Monday in a letter to the company's board.
Engine, which owns about 1.5% of EPAM's outstanding shares, recommended that the company immediately execute a $750 million accelerated share repurchase program using existing cash and continue repurchasing shares with cash generated in Q3 and Q4.
Engine also urged EPAM to evaluate additional buybacks using its strong balance sheet, free cash flow and potential leverage.
If the company's board is "unwilling" to pursue aggressive buybacks, Engine said EPAM should initiate a formal review of strategic alternatives, including a possible sale of the company. The investor also called for reforms to executive compensation, stronger stock-ownership requirements for management and directors, a board refresh and the creation of a capital allocation committee, according to the letter.
EPAM didn't immediately respond to' request for comment.
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