iGate Corporation (IGTE) is expected to generate strong double-digit earnings growth for the next few years, but its stock trades at a reasonable valuation.
The company is expected to grow its EPS 50.2% in 2010, 14.4% in 2011, and 18.5% per year over the long term. It also has a dividend yield of 0.9%.
This Zacks #2 Rank stock trades at just 16.0x 2010 consensus EPS estimates and 14.0x 2011 consensus EPS estimates.
Business
The company provides offshore information technology and business-process outsourcing services to Global 2000 and midsize companies. It has 34 offices in 16 countries and manages global delivery centers in Mexico, Australia, Malaysia, and India.
The company’s success comes from clients looking to reduce their IT costs by outsourcing work to offshore vendors. With the economy picking up steam and companies not wanting to ramp up costs, outsourcing IT costs makes a lot of sense.
It allows these companies to experience revenue growth without a corresponding increase in labor costs. This strategy expands profit margins and allows companies to accelerate earnings growth.
First-Quarter Results
On April 14, the company reported Q1 results. Revenues climbed 29.2% year-over-year. iGate’s earnings per share jumped 122% over the year-ago quarter, and it beat the Zacks Consensus Estimate by 4 cents.
Outlook
For 2010, management expects $252 million in revenue and $0.78 per share.
Estimates
In the last two months, the Zacks Consensus Estimate for 2010 is up 9 cents, or 13.2%, and the Zacks Consensus Estimate for 2011 is higher by 9 cents, or 11.4%.
The Chart
In March 2009, IGTE was a $2 stock. In the last 16 months, the stock has been on a tear, climbing over 500%. The stock topped out at the end of April and has been in a trading range from $11.00 to $13.40 in the last six weeks. IGTE is back above its 50-day moving average and is about 8% below its 52-week high.
