iGate Corp - Growth & Income

iGate Corporation (IGTE) is expected to generate strong double-digit earnings growth for the next few years, but its stock still trades at a reasonable price.

Growth and Income

The company is expected to grow its earnings per share 67% in 2010, 13% in 2011, and 20% over the long term. The stock also offers investors a dividend yield of 0.7%.

This Zacks #1 Rank stock trades at 18x 2010 consensus EPS estimates and 16x 2011 consensus EPS estimates.

Business

The company provides offshore information technology and business-process outsourcing services to Global 2000 and midsize companies. It has over 8,000 employees and 7 development centers in Mexico, Australia, Malaysia, and India.

iGate's success comes from clients looking to reduce their IT costs by outsourcing work to offshore vendors. With the global economy on the mend and companies not wanting to ramp up costs, outsourcing IT costs makes a lot of sense.

It allows these companies to experience revenue growth without a corresponding increase in labor costs. This strategy expands profit margins and allows companies to accelerate earnings growth.

Second-Quarter Results

On July 14, iGate announced second-quarter results. The company had revenue of $66.8 million, an increase of 42.7% compared to the year-ago quarter. IGTE earned $0.20 per share, beating the Zacks Consensus Estimate by 3 cents, or 17.7%. iGate has beaten the Zacks Consensus by an average of 21% in the last two quarters.

Estimates

In the last 30 days, the Zacks Consensus Estimate for 2010 is up 8 cents, or 10.4%, to $0.85, and the Zacks Consensus Estimate for 2011 is higher by 8 cents, or 9.1%, to $0.96.

Read the June 11 commentary on iGate Corp.

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