Patni Computer Systems ADS (PTI) recently hit a new 52-week high at $26.41 on the back of a global economic recovery that has companies once again deploying capital for enterprise technology systems and services.
Company Description
Patni Computer Systems Limited, together with its subsidiaries, provides information technology services that include application development, maintenance and support. The company was founded in 1978, has a market cap of $1.5 billion and is headquartered in Mumbai, India.
Patni suffered in the global recession of late 2008 and 2009 just like many other companies as its customers chose to curb IT spending. But now, with sales ticking higher and a refocused commitment to cutting costs and operational efficiencies, Patni has made big progress in both operating income and earnings. This dynamic showed up on Feb 11 when the company reported better than expected Q4 results.
Fourth-Quarter Results
Sales for the period were up 1.8% from last year to $167. Earnings came in well ahead of expectations at 46 cents per share, 21% ahead of the Zacks Consensus Estimate. Patni has surprised in each of the last four quarters by an average of 8 cents, or 28%. Operating income was up 22% from just the last quarter to $27 million.
The company’s commitment to cutting costs and driving down expenses showed up in a number of categories, with gross margin up 80 basis points to 37.9% of revenue and operating income up 370 basis points to 19.6%.
Estimates and Valuation
Estimates have been on the rise for the last few months, with the current year up 19 cents to $1.61. Based on this earnings projection, shares of PTI are trading with a forward P/E multiple of 15X, a slight discount to the overall market.
The Chart
Shares of PTI have posted huge gains over the last year, jumping from just above $4 to a recent 52-week high above $26. But in spite of the nice gains, the valuation picture is still in check. Take a look below.
Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Surprise Trader Service. Zacks Investment Research
