Most of the contract engineers are fresh out of college. Also most of the product companies eventualy will give permanent offer to good contractors (there is clause in contract preventing this but service companies are rarely in a position to enforce) . So usually most of the engineers (at least in my field) , who works in service company are low skilled or less experienced or are looking to go abroad (people join service company specificaly for US opportunity).
MNC hire contractors for usually 2 reasons
- During lean period , they can easily fire contractors without much fuss (this can be one of the reason why results were bad in Q1 & Q2 FY21).
- some middle management personnel in MNC gets a cut from service company (dirty secret)
There are lots of companies in any tech region offering contract engineers. Few of my friends even started service company 3 years ago ( play book is same . hire cheap engineers fresh out of college & guide them & sent them to an MNC). My point is there is no moat here .
Also when we compare results , please check my previous post . Results are amazing YOY becuase last year , Q1 was a very bad quarter . if i compare with FY2020 , results are very modest growth in 2 years & doesnt warrant this PE multiple. i have no comments on stock price movement .