The stock of leading software development services company EPAM Systems fell another 16.5% last week after reporting underwhelming Q4 results. This latest plunge took its valuation back to 2018 levels, which means that everyone, who invested during the past eight years and still holds is now underwater.
But what were investors thinking when they paid north of $700 per share for EPAM in late-2021? The company made $460 million in free cash flow that year, but with a market cap of roughly $40B, the stock was trading at nearly 90 times that FCF. In other words, investors were paying in advance what it would take the company almost a century to actually earn. Extreme optimism indeed.
Four years later now, EPAM’s revenues and free cash flows have actually grown by a cumulative 45% and 33% as of 2025, respectively. The stock, however, is down 80% from the 2021 record. Paying too high a price really is the biggest risk when it comes to stocks. Now that the company’s market cap is down to less than $8B, is EPAM finally ready to bounce back?
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This Elliott Wave chart seems to suggest so. It reveals that the post-2021 bear market can easily be seen as a simple A-B-C zigzag correction with a five-wave impulse in wave A and an ending diagonal in wave C. If this count is correct, last week’s drop to under $130 must be part of the fifth and final wave 5 of C. According to the theory, once a correction is over the preceding trend resumes. Since EPAM was clearly in an uptrend prior to this crash, it makes sense to expect a bullish reversal soon.
Nothing supports an Elliott Wave conclusion quite like seeing how the same kind of pattern combination has already played out elsewhere. Six months ago, on August 10, 2025, we spotted a very similar structure on the daily chart of Align Technology stock. And while it is too early to celebrate, Align is actually up 36% already. While business-wise EPAM Systems and Align Tech have nothing in common, we think this Elliott Wave setup is even more trustworthy in EPAM, given its much lower valuation and healthier revenue growth rates.
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