Tweet
$$$MR. MARKET$$$ is a proprietary investor and does not provide individual financial advice. The stocks mentioned on this forum do not represent individual buy or sell recommendations and should not be viewed as such. Individual investors should consider speaking with a professional investment adviser before making any investment decisions.
When I bought my first personal computer in 1988, it didn’t have the a mouse and there was no such thing as Windows. You had to know MS-DOS so that when something went wrong with your computer you could fix it yourself. As a matter of fact, there was no Geek Squad or no one you can call to fix your computer.
Fast forward to 2014. Now every person at every company has a computer at their desk and no one knows what to do when something goes wrong. You have to call someone to come in, charge you a lot of money and fix your computer. While that guy is in your company fixing your computer, he finds out about other stuff that your company does wrong and he fixes that too. He charges you a lot more money for the consulting. To make it even better, he sends all of his work overseas to an employee who isn’t paid squat. So he charges you United States fees and only deploys a fraction of the cost. Pure genius, right? That’s my next stock pick.
Today I bought stock in Virtusa Corporation (VRTU) at 37.52. I will sell it in 4 – 6 weeks at 43.23. Here’s why I like VRTU:
The analysis has to start with the chart.
This stock is going up and up and up. In fact, the stock is up 129% over the last 52 weeks. I would like to own stocks that go up 10% every month. That’s a great way to make money. Why is this stock going up? It’s simple…earnings earnings earnings.
Where are these earnings coming from? Over the last 10 years, companies have been playing copy cat and outsourcing all of their back office shared services. They thought they were saving money. What they have found is that many of these companies who have already done this outsourcing are seeing some of the chaos of having multiple outsource partners working across different areas of the same business. So now they are seeking partners who can align themselves within these vertical businesses to create significant value alongside business outcome. And they are finding that especially with Virtusa’s skill and size and the track record that they’ve had around service excellence that they are incredibly well positioned to pick off these vertically oriented outsourcing initiatives. And that’s clearly reflected as a part of their pipeline increasing. So what VRTU does, very simply, is organize the chaos caused by outsourcing. This is “the millennial experienceâ€.
The “millennial†is a way to leverage technological advancements to transform a customer’s business to meet the demands of customers and employees belonging to the millennial generation. Millennial is a term used to describe the generation of people born after 1984. This generation, which is rapidly becoming the mainstay of consumer buying as well as employee populations, has grown up in an environment guided by social media, mobility and a demand for products and services anytime, anywhere and on their device of choice. Virtusa has tailored their IT solutions to address this growing market and opportunity.
There has to be backward integration done to the underlying application foundation or the platform to be able to provide a true millennial experience. So, on the one side VRTU is seeing large programs around application, consolidation and rationalization or modernization to be able to create the infrastructure on top of which they can provide the millennial experience.
Those programs are generally large, they are transformational in nature. And they actually intersect the complexity of the enterprise that they work with. So, that results in much larger application development or platform development or platform consolidation initiative. Then on the other side there are smaller opportunities today, where you can actually demonstrate what it really takes to build a true millennial experience. This is using a lot of the capabilities available on tablets and handhelds that are not available on a desktop or a laptop. So, some of those initiatives start out smaller but at the moment you have to provide a skilled solution that reaches millions and millions of people. That’s when these programs are getting larger and larger and larger.
Today, the activity level has increased where not only are they investing in modernizing the infrastructure which are large programs, they are also investing in transforming the way they provide these services to consumers with a millennial experience. And they are finding very significant traction on both those sides.
Virtusa Corporation provides information technology consulting, technology implementation, and application outsourcing services in North America, Europe, the Middle East, and Asia. Massachusetts-based Virtusa has roughly 16 years of experience in providing IT services, globally. Its service offerings include IT consulting, implementation and application outsourcing. Virtusa helps its clients reduce their IT operations cost while increasing their ability to meet changing business needs. Currently, VRTU operates in the U.S., the United Kingdom, the Netherlands, Germany and Singapore and has 7,111 employees.
Virtusa is an industry leader with a solid track record of software solution delivery success as evidenced by their many success stories. Virtusa has highly referenceable and repeatable client base. They pride themselves in delivering benefits in productivity, profitability and shareholder value for their clients.
They anticipate and understand their client's emerging needs and work in close partnership to make their businesses stronger, valuable, more profitable and more productive. They also offer customers the capability of capturing market opportunities. They work closely with their client's leadership teams in order to gain better insights for providing the best possible IT services and solutions to their business challenges. This enables VRTU to establish extremely close partnerships that foster continuous operational improvements and better bottom-line results for their clients.
Virtusa combines their deep industry expertise with IT consulting and outsourcing services to deliver targeted and unique solutions and services that address the highest CIO priorities, including reducing total cost of ownership, accelerating time-to-market, increasing productivity and enhancing their clients’ customer experience. Their deep expertise in core technology services allows them to help their clients to lower total cost of ownership of their overall IT investments.
Virtusa was founded as ‘Software Solutions’ in 1997. The company was later renamed as ‘Technology Providers International’ and was involved in software development. In 1998, the company opened their head office at Westborough, Massachusetts and the company was incorporated as Technology Providers Inc. in the United States. In year 2000, Technology Providers International was renamed ‘eRUNWAY Inc.’ and offered eBusiness, Internet software development and systems integration services. eRUNWAY was re-launched as ‘Virtusa Corporation’ on April 22, 2002. The name Virtusa is derived from the Latin "virtus" meaning excellence. Virtusa went public on August 3, 2007 by listing on the NASDAQ exchange.
They provide business and IT consulting services to assist their clients to effectively manage their continually-changing IT environments and align their IT investments to effectively support current and future business requirements. Their goal is to help their clients to continually improve the effectiveness and efficiency of their IT application environments by adopting and evolving towards re-useable software platforms. They help clients analyze business and/or technology problems and identify and design platform-based solutions. They also assist their clients in planning and executing their IT initiatives and transition plans. During their consulting engagements, they often leverage proprietary frameworks and tools to differentiate their services from the VRTU competitors and to accelerate delivery.
Virtusa believes that their consulting services are further differentiated by their ability to leverage their global delivery model across their engagements. The onsite teams work directly with their clients to understand and analyze the current-state problems and to design conceptual solutions. Their offshore teams work seamlessly (and inexpensively) with their onsite teams to design and expand the conceptual solution, research alternatives, perform detailed analyses, develop prototypes and proofs-of-concept and produce detailed reports.
Virtusa Corporation has no long term debt at all. The average annual earnings growth for the past five years was quite high at 12.61%, the average annual sales growth for the past five years was also quite high at 16.06%. FY 2013 revenues grew 19.9% year-over-year to $333 million, driven by steadily expanded client relationships, more sources of recurring revenue and have established themselves as leaders on transformational programs and millennial enterprise readiness.
The stock’s return on equity is 12.1%, which is higher than the peer average. While its PE of 31 is higher than I usually like to buy stocks at, the premium looks justified given its growth prospects.
The 12-month EPS chart clearly shows that both share prices and earnings have trended up over the last few years:
Year EPS
2009 $0.50
2010 $0.51
2011 $0.66
2012 $0.79
2013 $1.11
The current momentum appears to be driven by the growing client base and price increases supported by estimate growth trends. The total cash of the company is $102 million, which is equal to about 10% of its market cap. Among the 7 ANAL-ysts covering the stock, four rate it a buy, 1 rates it a buy/hold, and two other idiots rate it a hold. The company is trading right below its 52-week high.
The earnings trend has continued. Second quarter fiscal 2014 revenue of $94.3 million increased 17% year-over-year and 4% sequentially. Second quarter fiscal 2014 operating income of $9.8 million increased 32% year-over-year; Operating profit margin increased from 9.2% in the prior year period to 10.4%. Second quarter fiscal 2014 diluted EPS increased 22% to $0.28, compared to diluted EPS of $0.23
VRTU on November 1, 2013 bought OSB. OSB is a New Jersey-based consulting firm specializing in the financial services and insurance domains, including SAP finance capabilities. OSB is focused on helping clients automate their finance & accounting processes, reporting capabilities and regulatory compliance. The addition of OSB will enable Virtusa to take on a more strategic role across several large programs already in place, as well as enable the Company to offer a broader set of finance transformation services
VRTU maintains a marketing presence in the United States, Europe, including the United Kingdom, India, Sri Lanka and Singapore. Their marketing team seeks to build their brand awareness and generate target
lists and sales leads through industry events, press releases, thought leadership publications, direct marketing campaigns and referrals from clients, strategic alliances and industry analysts. The marketing team maintains frequent contact with industry analysts and experts to understand market trends and dynamics.
VRTU has strategic alliances with software companies, some of which are also their clients, to provide services to their customers. These alliances differentiate VRTU from their competition. Their extensive engineering, quality assurance and technology implementation and support services to software companies enable them to compete more effectively for the technology implementation and support services required by their customers. In addition, the strategic alliances with software companies allows them to share sales leads, develop joint account plans and engage in joint marketing activities.
This year, Virtusa ranked #58 on the list of financial technology companies that were judged according to their global revenues. The company has moved up 30 spots in the past three years. This upward movement is clear indication of the company’s strong growth and the value it continues to bring to the financial services industry.
Virtusa’s banking and financial services customers include seven of the top ten U.S. banks, four of the top ten global banks, several of the top brokerage firms and two of the largest card and payment providers. Virtusa uses its Platforming methodology and global delivery model to help companies optimize their software applications and platforms, enhance operational efficiencies, minimize risks, sustain cost leadership, and support their business transformation initiatives.
So you love the story so far. The story has resulted in earnings. In order to know where the stock is going to go, we need to know what’s next?
In the most recent earnings call, the company indicated that they envisioned:
Third quarter fiscal 2014 revenue is expected to be in the range of $100.0 to $102.0 million, with diluted EPS of $0.32 to $0.36.
Fiscal year 2014 revenue is expected to be in the range of $390.0 to $396.0 million, with diluted EPS of $1.25 to $1.33.
The ANAL-ysts are afraid to make any projections. But $$$MR. MARKET$$$ has no fear. This is easy. If you look at the last 3 years, the first thing you notice is that the earnings from the 2nd half of the fiscal year are about 40% higher than the first half of the year. That means that their earnings will be $1.35 for the year, a wee bit higher than what they are calling. That’s what the company is using to set your expectations. $$$MR. MARKET$$$ knows better though. If you look at the the YOY earnings growth you see it’s actually at 42%. So I think if you take 2013’s back half earnings of $0.64/share and multiply it by 42%, you get earnings for the next 6 months in 2014 of $0.91/share. That means fiscal year 2014 earnings would be $1.48/share ($0.57 plus $0.91). If you take the $1.48 and multiply by the PE of 31.5, you get a share price of 46.62, which is past my sell target.
Another $$$MR. MARKET$$$ winner cooking, so to speak.
Here’s what the boss had to say:
Kris Canekeratne, Virtusa’s Chairman and CEO, stated, “We are very pleased with the progress that our teams have made and our ability to differentiate our services in areas that help our clients, modernize, transform and rationalize their ideal state both in terms of accelerating innovation and running our client’s businesses more efficiently.
This quarter, was further validation that our core growth enablers are targeted, effective and resonate particularly well in the geographies and industries we serve. Specifically, they are meeting our client’s needs to immediately reduce operating costs and free up budget to transform and modernize their businesses.
Our differentiated services are providing clients with significant value enabling us to pursue and win larger engagements, expand our wallet share and strengthen our positioning as their strategic partner. And overall, when it comes to IT rationalization and consolidation, I think we are pretty tough act to beat, given the fact that we have been doing this for so long. We have so many cards on our bags and so many success stories about how we got in and ring out efficiencies and improved ways of running the business more efficiently and cost effectively which enables our clients in doing best in innovation and transformation.
Additionally, the success we are having is enabling us to expand our presence in the industry’s reserve and grow our market opportunity. As a result of the progress we have made against our strategic objectives and the momentum we have, we have increased our organic revenue guidance for the full fiscal year. Overall, we are pleased with our performance in our second fiscal quarter. The visibility we have combined with the momentum across our client base, our differentiated services and unparalleled experience developing customer centric solution, gives us the confidence to raise full year organic revenue guidance.
We will continue to focus on the three areas of our growth platform, IT rationalization consolidation, industry leading transformational solutions, and services that deliver in millennial experience to expand our market opportunity, extend our differentiation and strengthen our position as thought leaders in the industry.
So overall we’re finding that they’re seeing good growth in our pipeline driven by general pipeline as well as an increase in growth in our big deal pipeline. Much of this is a direct result of the focus across our key growth enablers including the resonance that we have with things like IT rationalization and consolidation which is helping our clients, run their businesses better or more efficiently or perhaps more cost efficiently.
It has to do with a lot of the transformational programs that we offer, where we are testing clients are industry leading across several areas in banking and financial services, in insurance, things like planned onboarding, compliance and regulatory initiatives in banking and financial services, areas like policy administration, gains processing etcetera, in insurance, portals and big data initiatives across the industries that we service.
So much of this has resulted in strong pipelines, growth in our pipelines from six months ago or 12 months ago. And due closure rates have also been consistent. This is what’s really giving us confidence notwithstanding that momentum and the progress that we have made to be able to raise our organic guidance for the full fiscal year.
Using our deep industry experience and consultative technology expertise, we help our clients deliver a distinctive millennial experience, transform their business and benefit from platforming efficiencies. This recognition is testament to the dedication of our team members who work tirelessly to help our banking and financial services clients accelerate time to market, lower overall costs, comply with regulations and improve operational efficiencies.
Ranjan Kalia, Chief Financial Officer, said, “Now, I would like to spend a momentum providing you with you with our current thoughts on our third quarter and full fiscal year 2014 guidance. Our clients are increasingly looking to invest in transformational programs around customer experience, revenue to incompliance, next generation platforms and cost efficiencies.
Our differentiated IT services positions us well to intersect all of these opportunities. We see increasing opportunities to participate in larger programs, for example, our expertise in IT rationalization is enabling us to take a new approach to areas such as application support and maintenance.
We are now capturing programs that previously weren’t available to us and these are creating recurring revenue streams. The OSB acquisition is another example of how we can further increase our addressable market opportunity and capture a greater portion of our client’s budgets.
Europe is now more open to outsourcing and offshoring and companies are focused on transformational initiatives around customer experience. We’re seeing an increase in demand for healthcare analytics driven by compliance, cost reductions and quality of paid initiatives associated with Affordable Care Act.
For the second half of fiscal year 2014, we expect our organic sequential revenue growth rates to accelerate from current levels, driving the increase in our top-line guidance. Our organic growth will be driven by meaningful expansion in our non Top-10 clients and growth across all industry groups with particular strength in C&T.
Fiscal year 2014, we continue to expect market leading revenue growth. As we execute against our straightest strategy of becoming a significantly larger company. We have been focusing on adding new clients that can scale to strategic levels and grow our non Top 10 portfolio faster than our top 10. These initiatives remain on track.â€
I don’t need a computer or a consulting firm to know that this stock price is going to hit my target. I may need a computer to count my money though.
I am HUGE!!
$$$MR. MARKET$$$
$$$MR. MARKET$$$ is a proprietary investor and does not provide individual financial advice. The stocks mentioned on this forum do not represent individual buy or sell recommendations and should not be viewed as such. Individual investors should consider speaking with a professional investment adviser before making any investment decisions.
When I bought my first personal computer in 1988, it didn’t have the a mouse and there was no such thing as Windows. You had to know MS-DOS so that when something went wrong with your computer you could fix it yourself. As a matter of fact, there was no Geek Squad or no one you can call to fix your computer.
Fast forward to 2014. Now every person at every company has a computer at their desk and no one knows what to do when something goes wrong. You have to call someone to come in, charge you a lot of money and fix your computer. While that guy is in your company fixing your computer, he finds out about other stuff that your company does wrong and he fixes that too. He charges you a lot more money for the consulting. To make it even better, he sends all of his work overseas to an employee who isn’t paid squat. So he charges you United States fees and only deploys a fraction of the cost. Pure genius, right? That’s my next stock pick.
Today I bought stock in Virtusa Corporation (VRTU) at 37.52. I will sell it in 4 – 6 weeks at 43.23. Here’s why I like VRTU:
The analysis has to start with the chart.
This stock is going up and up and up. In fact, the stock is up 129% over the last 52 weeks. I would like to own stocks that go up 10% every month. That’s a great way to make money. Why is this stock going up? It’s simple…earnings earnings earnings.
Where are these earnings coming from? Over the last 10 years, companies have been playing copy cat and outsourcing all of their back office shared services. They thought they were saving money. What they have found is that many of these companies who have already done this outsourcing are seeing some of the chaos of having multiple outsource partners working across different areas of the same business. So now they are seeking partners who can align themselves within these vertical businesses to create significant value alongside business outcome. And they are finding that especially with Virtusa’s skill and size and the track record that they’ve had around service excellence that they are incredibly well positioned to pick off these vertically oriented outsourcing initiatives. And that’s clearly reflected as a part of their pipeline increasing. So what VRTU does, very simply, is organize the chaos caused by outsourcing. This is “the millennial experienceâ€.
The “millennial†is a way to leverage technological advancements to transform a customer’s business to meet the demands of customers and employees belonging to the millennial generation. Millennial is a term used to describe the generation of people born after 1984. This generation, which is rapidly becoming the mainstay of consumer buying as well as employee populations, has grown up in an environment guided by social media, mobility and a demand for products and services anytime, anywhere and on their device of choice. Virtusa has tailored their IT solutions to address this growing market and opportunity.
There has to be backward integration done to the underlying application foundation or the platform to be able to provide a true millennial experience. So, on the one side VRTU is seeing large programs around application, consolidation and rationalization or modernization to be able to create the infrastructure on top of which they can provide the millennial experience.
Those programs are generally large, they are transformational in nature. And they actually intersect the complexity of the enterprise that they work with. So, that results in much larger application development or platform development or platform consolidation initiative. Then on the other side there are smaller opportunities today, where you can actually demonstrate what it really takes to build a true millennial experience. This is using a lot of the capabilities available on tablets and handhelds that are not available on a desktop or a laptop. So, some of those initiatives start out smaller but at the moment you have to provide a skilled solution that reaches millions and millions of people. That’s when these programs are getting larger and larger and larger.
Today, the activity level has increased where not only are they investing in modernizing the infrastructure which are large programs, they are also investing in transforming the way they provide these services to consumers with a millennial experience. And they are finding very significant traction on both those sides.
Virtusa Corporation provides information technology consulting, technology implementation, and application outsourcing services in North America, Europe, the Middle East, and Asia. Massachusetts-based Virtusa has roughly 16 years of experience in providing IT services, globally. Its service offerings include IT consulting, implementation and application outsourcing. Virtusa helps its clients reduce their IT operations cost while increasing their ability to meet changing business needs. Currently, VRTU operates in the U.S., the United Kingdom, the Netherlands, Germany and Singapore and has 7,111 employees.
Virtusa is an industry leader with a solid track record of software solution delivery success as evidenced by their many success stories. Virtusa has highly referenceable and repeatable client base. They pride themselves in delivering benefits in productivity, profitability and shareholder value for their clients.
They anticipate and understand their client's emerging needs and work in close partnership to make their businesses stronger, valuable, more profitable and more productive. They also offer customers the capability of capturing market opportunities. They work closely with their client's leadership teams in order to gain better insights for providing the best possible IT services and solutions to their business challenges. This enables VRTU to establish extremely close partnerships that foster continuous operational improvements and better bottom-line results for their clients.
Virtusa combines their deep industry expertise with IT consulting and outsourcing services to deliver targeted and unique solutions and services that address the highest CIO priorities, including reducing total cost of ownership, accelerating time-to-market, increasing productivity and enhancing their clients’ customer experience. Their deep expertise in core technology services allows them to help their clients to lower total cost of ownership of their overall IT investments.
Virtusa was founded as ‘Software Solutions’ in 1997. The company was later renamed as ‘Technology Providers International’ and was involved in software development. In 1998, the company opened their head office at Westborough, Massachusetts and the company was incorporated as Technology Providers Inc. in the United States. In year 2000, Technology Providers International was renamed ‘eRUNWAY Inc.’ and offered eBusiness, Internet software development and systems integration services. eRUNWAY was re-launched as ‘Virtusa Corporation’ on April 22, 2002. The name Virtusa is derived from the Latin "virtus" meaning excellence. Virtusa went public on August 3, 2007 by listing on the NASDAQ exchange.
They provide business and IT consulting services to assist their clients to effectively manage their continually-changing IT environments and align their IT investments to effectively support current and future business requirements. Their goal is to help their clients to continually improve the effectiveness and efficiency of their IT application environments by adopting and evolving towards re-useable software platforms. They help clients analyze business and/or technology problems and identify and design platform-based solutions. They also assist their clients in planning and executing their IT initiatives and transition plans. During their consulting engagements, they often leverage proprietary frameworks and tools to differentiate their services from the VRTU competitors and to accelerate delivery.
Virtusa believes that their consulting services are further differentiated by their ability to leverage their global delivery model across their engagements. The onsite teams work directly with their clients to understand and analyze the current-state problems and to design conceptual solutions. Their offshore teams work seamlessly (and inexpensively) with their onsite teams to design and expand the conceptual solution, research alternatives, perform detailed analyses, develop prototypes and proofs-of-concept and produce detailed reports.
Virtusa Corporation has no long term debt at all. The average annual earnings growth for the past five years was quite high at 12.61%, the average annual sales growth for the past five years was also quite high at 16.06%. FY 2013 revenues grew 19.9% year-over-year to $333 million, driven by steadily expanded client relationships, more sources of recurring revenue and have established themselves as leaders on transformational programs and millennial enterprise readiness.
The stock’s return on equity is 12.1%, which is higher than the peer average. While its PE of 31 is higher than I usually like to buy stocks at, the premium looks justified given its growth prospects.
The 12-month EPS chart clearly shows that both share prices and earnings have trended up over the last few years:
Year EPS
2009 $0.50
2010 $0.51
2011 $0.66
2012 $0.79
2013 $1.11
The current momentum appears to be driven by the growing client base and price increases supported by estimate growth trends. The total cash of the company is $102 million, which is equal to about 10% of its market cap. Among the 7 ANAL-ysts covering the stock, four rate it a buy, 1 rates it a buy/hold, and two other idiots rate it a hold. The company is trading right below its 52-week high.
The earnings trend has continued. Second quarter fiscal 2014 revenue of $94.3 million increased 17% year-over-year and 4% sequentially. Second quarter fiscal 2014 operating income of $9.8 million increased 32% year-over-year; Operating profit margin increased from 9.2% in the prior year period to 10.4%. Second quarter fiscal 2014 diluted EPS increased 22% to $0.28, compared to diluted EPS of $0.23
VRTU on November 1, 2013 bought OSB. OSB is a New Jersey-based consulting firm specializing in the financial services and insurance domains, including SAP finance capabilities. OSB is focused on helping clients automate their finance & accounting processes, reporting capabilities and regulatory compliance. The addition of OSB will enable Virtusa to take on a more strategic role across several large programs already in place, as well as enable the Company to offer a broader set of finance transformation services
VRTU maintains a marketing presence in the United States, Europe, including the United Kingdom, India, Sri Lanka and Singapore. Their marketing team seeks to build their brand awareness and generate target
lists and sales leads through industry events, press releases, thought leadership publications, direct marketing campaigns and referrals from clients, strategic alliances and industry analysts. The marketing team maintains frequent contact with industry analysts and experts to understand market trends and dynamics.
VRTU has strategic alliances with software companies, some of which are also their clients, to provide services to their customers. These alliances differentiate VRTU from their competition. Their extensive engineering, quality assurance and technology implementation and support services to software companies enable them to compete more effectively for the technology implementation and support services required by their customers. In addition, the strategic alliances with software companies allows them to share sales leads, develop joint account plans and engage in joint marketing activities.
This year, Virtusa ranked #58 on the list of financial technology companies that were judged according to their global revenues. The company has moved up 30 spots in the past three years. This upward movement is clear indication of the company’s strong growth and the value it continues to bring to the financial services industry.
Virtusa’s banking and financial services customers include seven of the top ten U.S. banks, four of the top ten global banks, several of the top brokerage firms and two of the largest card and payment providers. Virtusa uses its Platforming methodology and global delivery model to help companies optimize their software applications and platforms, enhance operational efficiencies, minimize risks, sustain cost leadership, and support their business transformation initiatives.
So you love the story so far. The story has resulted in earnings. In order to know where the stock is going to go, we need to know what’s next?
In the most recent earnings call, the company indicated that they envisioned:
Third quarter fiscal 2014 revenue is expected to be in the range of $100.0 to $102.0 million, with diluted EPS of $0.32 to $0.36.
Fiscal year 2014 revenue is expected to be in the range of $390.0 to $396.0 million, with diluted EPS of $1.25 to $1.33.
The ANAL-ysts are afraid to make any projections. But $$$MR. MARKET$$$ has no fear. This is easy. If you look at the last 3 years, the first thing you notice is that the earnings from the 2nd half of the fiscal year are about 40% higher than the first half of the year. That means that their earnings will be $1.35 for the year, a wee bit higher than what they are calling. That’s what the company is using to set your expectations. $$$MR. MARKET$$$ knows better though. If you look at the the YOY earnings growth you see it’s actually at 42%. So I think if you take 2013’s back half earnings of $0.64/share and multiply it by 42%, you get earnings for the next 6 months in 2014 of $0.91/share. That means fiscal year 2014 earnings would be $1.48/share ($0.57 plus $0.91). If you take the $1.48 and multiply by the PE of 31.5, you get a share price of 46.62, which is past my sell target.
Another $$$MR. MARKET$$$ winner cooking, so to speak.
Here’s what the boss had to say:
Kris Canekeratne, Virtusa’s Chairman and CEO, stated, “We are very pleased with the progress that our teams have made and our ability to differentiate our services in areas that help our clients, modernize, transform and rationalize their ideal state both in terms of accelerating innovation and running our client’s businesses more efficiently.
This quarter, was further validation that our core growth enablers are targeted, effective and resonate particularly well in the geographies and industries we serve. Specifically, they are meeting our client’s needs to immediately reduce operating costs and free up budget to transform and modernize their businesses.
Our differentiated services are providing clients with significant value enabling us to pursue and win larger engagements, expand our wallet share and strengthen our positioning as their strategic partner. And overall, when it comes to IT rationalization and consolidation, I think we are pretty tough act to beat, given the fact that we have been doing this for so long. We have so many cards on our bags and so many success stories about how we got in and ring out efficiencies and improved ways of running the business more efficiently and cost effectively which enables our clients in doing best in innovation and transformation.
Additionally, the success we are having is enabling us to expand our presence in the industry’s reserve and grow our market opportunity. As a result of the progress we have made against our strategic objectives and the momentum we have, we have increased our organic revenue guidance for the full fiscal year. Overall, we are pleased with our performance in our second fiscal quarter. The visibility we have combined with the momentum across our client base, our differentiated services and unparalleled experience developing customer centric solution, gives us the confidence to raise full year organic revenue guidance.
We will continue to focus on the three areas of our growth platform, IT rationalization consolidation, industry leading transformational solutions, and services that deliver in millennial experience to expand our market opportunity, extend our differentiation and strengthen our position as thought leaders in the industry.
So overall we’re finding that they’re seeing good growth in our pipeline driven by general pipeline as well as an increase in growth in our big deal pipeline. Much of this is a direct result of the focus across our key growth enablers including the resonance that we have with things like IT rationalization and consolidation which is helping our clients, run their businesses better or more efficiently or perhaps more cost efficiently.
It has to do with a lot of the transformational programs that we offer, where we are testing clients are industry leading across several areas in banking and financial services, in insurance, things like planned onboarding, compliance and regulatory initiatives in banking and financial services, areas like policy administration, gains processing etcetera, in insurance, portals and big data initiatives across the industries that we service.
So much of this has resulted in strong pipelines, growth in our pipelines from six months ago or 12 months ago. And due closure rates have also been consistent. This is what’s really giving us confidence notwithstanding that momentum and the progress that we have made to be able to raise our organic guidance for the full fiscal year.
Using our deep industry experience and consultative technology expertise, we help our clients deliver a distinctive millennial experience, transform their business and benefit from platforming efficiencies. This recognition is testament to the dedication of our team members who work tirelessly to help our banking and financial services clients accelerate time to market, lower overall costs, comply with regulations and improve operational efficiencies.
Ranjan Kalia, Chief Financial Officer, said, “Now, I would like to spend a momentum providing you with you with our current thoughts on our third quarter and full fiscal year 2014 guidance. Our clients are increasingly looking to invest in transformational programs around customer experience, revenue to incompliance, next generation platforms and cost efficiencies.
Our differentiated IT services positions us well to intersect all of these opportunities. We see increasing opportunities to participate in larger programs, for example, our expertise in IT rationalization is enabling us to take a new approach to areas such as application support and maintenance.
We are now capturing programs that previously weren’t available to us and these are creating recurring revenue streams. The OSB acquisition is another example of how we can further increase our addressable market opportunity and capture a greater portion of our client’s budgets.
Europe is now more open to outsourcing and offshoring and companies are focused on transformational initiatives around customer experience. We’re seeing an increase in demand for healthcare analytics driven by compliance, cost reductions and quality of paid initiatives associated with Affordable Care Act.
For the second half of fiscal year 2014, we expect our organic sequential revenue growth rates to accelerate from current levels, driving the increase in our top-line guidance. Our organic growth will be driven by meaningful expansion in our non Top-10 clients and growth across all industry groups with particular strength in C&T.
Fiscal year 2014, we continue to expect market leading revenue growth. As we execute against our straightest strategy of becoming a significantly larger company. We have been focusing on adding new clients that can scale to strategic levels and grow our non Top 10 portfolio faster than our top 10. These initiatives remain on track.â€
I don’t need a computer or a consulting firm to know that this stock price is going to hit my target. I may need a computer to count my money though.
I am HUGE!!
$$$MR. MARKET$$$
$$$MR. MARKET$$$ is a proprietary investor and does not provide individual financial advice. The stocks mentioned on this forum do not represent individual buy or sell recommendations and should not be viewed as such. Individual investors should consider speaking with a professional investment adviser before making any investment decisions.
Comment