NEW YORK (TheStreet) -- iGATE Corp. (IGTE) was downgraded to "reduce" from "neutral" at Nomura Holdings (NMR) with a price target of $35 from $29, with analysts saying the current multiple is unlikely to be sustainable.
That was despite the technology company on Wednesday reporting its second quarter earnings results of 48 cents per share, beating the analysts' consensus estimate of 47 cents.
Second quarter revenue was up 10% to $312 million, beating analyst expectations of $306 million.
"We rate IGATE CORP (IGTE) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, good cash flow from operations, notable return on equity and expanding profit margins. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 16.1%. Since the same quarter one year prior, revenues slightly increased by 9.9%. 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.
- Compared to its closing price of one year ago, IGTE's share price has jumped by 134.79%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, IGTE should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- Net operating cash flow has increased to $17.17 million or 29.20% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -19.37%.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the IT Services industry and the overall market on the basis of return on equity, IGATE CORP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- IGATE CORP's earnings per share declined by 15.2% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, IGATE CORP increased its bottom line by earning $1.65 versus $1.12 in the prior year. This year, the market expects an improvement in earnings ($2.11 versus $1.65).
- You can view the full analysis from the report here: IGTE Ratings Report