Optimistic Investors take a look at Virtusa Corp (NASADQ: VRTU)

Virtuosa Corp (NASDAQ: VRTU), Very attractive Valuation

 

Virtusa Corp (NASDAQ: VRTU), Attractive Valuations

Virtusa Corp (NASDAQ: VRTU), Attractive Valuations

Shares of Virtusa Corp. (NASDAQ: VRTU), a leading global information technology services company that offers a broad spectrum of business consulting and outsourcing services, has risen by 19% for the year. The overall earnings growth of the outsourcing sector is at 23% for this year. This is higher than the information technology industry’s growth rate of 20%. In the case of Virtusa, it is expected to grow its earnings by 34.20% this year. For the next 5 years, analysts see that earnings will grow by 23% a year. This is in line with the management’s outlook of an improving trend for the next few quarters.

Second Quarter Results Leads to Higher Guidance

Revenues amounted to $80.5 million, an increase of 6% from the previous quarter and 15% compared to the same period last year. Operating income reached $7.4 million, an increase from the previous quarter’s $6.9 million and the prior year’s operating income of $5.5 million. This translates to operating margins of 9.2%, a big improvement from the previous year’s 7.8% operating margins.

Net income for the period came in at $5.8 million, or equivalent to diluted per share of $0.23, an increase from the previous year’s net income of $4.7 million, or $0.18 diluted earnings per share. This seems a solid quarter for the company, continuing its momentum from the first quarter. The company witnessed increasing demand for its application outsourcing service but partially offset by soft demand on its consulting services. In terms of geography, both Americas and Europe contributed significantly. Moving forward, it sees stronger second half as it has steadily expanded client relationships. It has also added more sources of recurring revenues and established the company as a leader on transformational programs and millennial enterprise readiness.

With these strong results, management raised its guidance for the year. Fiscal 2013 revenues are expected between $328 million to $334 million. Forecasted diluted earnings per share will be at $1.03 to $1.11 for the period. This assumes an average share count of around 25.6 million, excluding repurchases and stock-based awards. Despite the increased in outlook, this is still lower than the consensus estimates of $1.31 earnings per share.

In contrast, these results are definitely higher than its historical financial performance. For the last 5 years, it has grown its revenues by 17% a year. Its operating margins have improved from 0.8% in 2006 to 8.6% in 2012. Return on equity improved from 7% to 9% for the period. 

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