iGATE (IGTE, Financial) had been struggling in the past. The shares were disappointing on the exchange and fell up to 13% in the past, but it seems that the company’s efforts of a turn back are working well and the company is improving. This is evidence of better-than-expected results that the company posted in the recently reported quarter. The stock has grown more than 10% in the last year which shows that IGATE still has much room for improvement. In addition, the strong numbers on revenue and earnings will also be key reasons for the company gaining market share in future. With the future looking bright, IGATE can be a good investment option. Let us see how?
Turnaround mode
In the recently reported quarter, IGATE posted revenue of $322.8 million exceeding consensus estimates of $321.7 million as compared to the same quarter last year. On the earnings part, IGATE posted EPS of $0.52 per share which also beat analysts’ estimates of $0.51 per share.
Looking at the present scenario there is no doubt that IGATE is improving. The metrics are getting stronger and the company is showing positive signs for a good come back later in the future. The stock, however, once was a left out stock a couple of years back when it continually fell by more than 13%. But the operational excellence that the company is showing has really kept its spirits high, and it is now transforming to a profitable business that can be noted by a good 10% increase over the year.
The analysts are anticipating that IGATE will improve more and can be a strong long-term holding as well. IGATE however had a tough past with weaker margins due to the aggressive investment decision that it made in some transformational client engagements. But now it seems that IGATE has decided to never turn back and is confident of maintaining healthy earnings growth in future as well.
The way forward
IGATE is now well positioned for improving its financial performance. The company has implemented several changes in its structure, and it seems its clients are responding well to this transformation. IGATE is seeing some good traction in the market for its industry utility solutions, Reference Data Management Solution for the financial sector (IDMS) and Long Term Care Solution for healthcare sector (IBAS).
With this growth IGATE is confident of finding significant market traction in future. In the past IGATE became the only IT service company to be listed in the 100 fastest-growing companies in the U.S. this will be an added advantage to IGATE, further supporting its go-to-market strategy.
IGATE has also entered couple of large deals on which it is counting on. Its ITOP pipeline is moving smoothly and it is making meaningful investment in creating solutions for Insurance and Healthcare clients and reference data management solutions for its banking service clients. This will further strengthen IGATE’s position and will prove a key growth driver for the company in the future.
Moreover, IGATE is also laser focused on its aggressive client mining strategy, and it is seeing good progress in this strategic priority by expanding its relationship with its existing clients. It is enhancing this relationship by adding client service people, domain consultants etc. with this initiative IGATE is looking forward to maintain a strong client base in future.
On the international front, IGATE is investing to strengthen its market position in Europe. While it is seeing strong market response from the market in U.K. it is now aligning its operations to strengthen its presence in the regions such as Germany, Switzerland and Nordics. IGATE is confident of gaining traction in these countries in future.
Besides these, IGATE also has expansion strategy. It is focusing India for its expansion. It has announced a new facility in Noida and also a 850-seat expansion in Hyderabad followed by a 500-seat expansion in Mumbai. This will enhance the operational area of the company also strengthening its competitive position.
Conclusion
Now moving on to the fundamentals, with trailing P/E of 41.60 IGATE is slightly over-valued. With forward P/E of 15.23 the company is showing some positive signs of earnings growth in future. Even in the next five year the company’s earnings are growing with a CAGR of 15.00% which is quite close to the industry average of 20.40%. With these facts and statistics it can be anticipated that the stock is moving steadily and has much room for better improvement in future. So, from the investment perspective, though IGATE is expensive but the investors shouldn’t mind paying heavy premium for the stock at these valuation levels and considering the growth momentum of the stock, the investors should definitely include IGATE Corp. in their portfolios.
