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Value

Companies are spending on technology again. Ness Technologies (NSTC) recently announced record quarterly revenue. This Zacks #1 Rank (strong buy) also has attractive valuations, with a price-to-sales ratio of just 0.4.

Ness Technologies is an Israeli-based provider of IT and business services and consulting. It specializes in software product engineering and enterprise applications services.

The company has operations in North America, Europe, India and Israel and customers in 20 countries.

Won Barclays Contract

On Mar 15, Ness announced it had won a contract with Barclays Capital, which is the investment banking arm of Barclays Bank, to establish an Israel Development and Engineering Center. The Center would provide technology development and engineering services.

The contract is worth $75 million over 5 years.

Ness Surprised By 240% in the Fourth Quarter

Ness reported its fourth quarter and full year results on Feb 2 and easily blew by the Zacks Consensus Estimate by 12 cents. Earnings per share were 17 cents compared to the consensus of just 5 cents. The company made 8 cents in the year ago quarter.

This was the 7th earnings surprise in a row.

Revenue jumped 16% to a quarterly record of $157.4 million. For the year, revenue climbed 12% to $571.8 million.

Both of the company's segments saw increased revenue in the fourth quarter. System Integration and Application Development also saw improvement in Central and Eastern Europe.

In Central and Eastern Europe, for both segments, operating margin hit the highest level in 8 quarters as it continued to recover.

Outlook for 2011

Ness expects top line growth and operating margin expansion in 2011.

Revenue is projected to be in the range of $595 million to $605 million. Earnings per share are expected between 42 and 48 cents.

Zacks Consensus Estimates Rise

While the 2011 Zacks Consensus Estimate jumped to 44 cents from 33 cents in the last 2 months on the company's guidance, this is still 3.6% under the 46 cents earned in 2010.

Earnings growth is expected to return in earnest in 2012 as analysts project earnings growth of 25.2% to 56 cents.

Ness is expected to report first quarter results on Apr 27.

Lots of Value in Ness

In addition to the low P/S ratio, Ness also has other value characteristics.

The company is trading with a forward P/E of 13.6, which is under my cut-off of 15x for "value".

It also has a really low price-to-book of 0.7, under the 3.0 usually used for a "value" P/B ratio.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service. You can follow her at twitter.com/traceyryniec.

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