Under the Radar: Informatica's Big Ambitions

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BOSTON (TheStreet) -- Informatica(INFA Quote) competes with software juggernauts Microsoft(MSFT Quote) and Oracle(ORCL Quote) in what's known as data-integration services.

The Redwood City, Calif.-based company was founded in 1993 by Gaurav Dhillon and Diaz Nesamoney, Indian entrepreneurs who thought data integration could be achieved more efficiently using graphical tools. Data integration involves the storage, sorting and access of information, among other things, by companies' IT departments.

Informatica counts as clients 84 companies in the Fortune 100, including 3M(MMM Quote) and Dell(DELL Quote). It also provides services to government agencies around the world. With a market value of about $1.6 billion, it's not a household name, but Informatica has a diverse product line-up and an impressive record of growth.

The company's second-quarter revenue rose 12% to $117 million, four times the industry average. Net income improved 4% to $12 million and earnings per share jumped 8% to 13 cents, helped by a lower share count. The operating margin improved from 14% to 15% and the net margin inched past 10%.

Informatica has a clean balance sheet, with $421 million of cash reserves and just $201 million of debt obligations. A quick ratio of 2.3 reflects ample liquidity, and a debt-to-equity ratio 0.5 indicates restrained leverage. We give the company an overall financial strength score of 7 out of 10, on par with our "buy"-rated average.

Informatica's stock has surged 32% in 2009, beating the Nasdaq, large-cap peers such as Microsoft and Oracle, and other small-cap companies such as Compuware(CPWR Quote) and Quest Software(QSFT Quote). As a result of the price spike, the stock is now at a premium to the market. The shares are trading at a price-to-earnings ratio of 30, in line with software peers, but more expensive than the S&P 500.