NEW YORK (TheStreet) -- Shares of IGATE (IGTE) are gaining by 3.36% to $47.39 in pre-market trading on Monday morning, following the integrated technology and operations-based solutions provider's announcement that it will be acquired by the French consulting, technology, and outsourcing services provider Capgemini (CGEMY) for $4 billion.
"IGATE strengthens Capgemini's key businesses in application and infrastructure services as well as BPO and engineering services. Moreover, the transaction enriches Capgemini's portfolio with new flagship clients such as General Electric (GE) - Get Report and Royal Bank of Canada (RY) - Get Report," the companies said in a statement announcing the deal.
The purchase will grow Capgemini's presence in North America, enhance the group's competitiveness, and reinforce Capgemini's position in the retail, manufacturing and healthcare sectors, the statement continued.
"In Capgemini, we have found a partner that will advance our ability to innovate and build industry solutions that will enhance the value proposition we bring to our clients. In addition, this powerful combination will provide exciting opportunities for our employees to expand their capabilities," IGATE CEO Ashok Vemuri said in the statement.
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Separately, TheStreet Ratings team rates IGATE CORP as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate IGATE CORP (IGTE) a HOLD. The primary factors that have impacted our rating are mixed-some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, poor profit margins and feeble growth in the company's earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth greatly exceeded the industry average of 20.8%. Since the same quarter one year prior, revenues rose by 10.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the IT Services industry. The net income increased by 14.6% when compared to the same quarter one year prior, going from $33.14 million to $37.97 million.
- Even though the current debt-to-equity ratio is 1.33, it is still below the industry average, suggesting that this level of debt is acceptable within the IT Services industry. Despite the fact that IGTE's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.62 is high and demonstrates strong liquidity.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the IT Services industry and the overall market, IGATE CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for IGATE CORP is currently lower than what is desirable, coming in at 34.77%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 11.45% trails that of the industry average.
- You can view the full analysis from the report here: IGTE Ratings Report