Virtusa (VRTU - Snapshot Report) is showing consistently strong growth rates for the near future. And that growth is coming at a very reasonable price.
With revenues on the rise and a new acquisition, analysts are raising estimates just ahead of the next earnings report, a great signal.
Virtusa provides IT services to such as consulting, maintenance, development and others to clients on a global scale.
The last quarterly update came back in May and showed a 22% increase in the top line, to $58.3 million. That is also a 5% increase over the previous quarter. Operating income was up sharply, from $3.6 million a year ago to $5.7 million.
Earnings per share came out to $0.21, which was in line with expectations.
Virtusa's CEO said "The fourth quarter was a strong finish to a fiscal year in which we achieved revenue, operating profit and EPS growth, each in excess of 30 percent"
In the same press release Virtusa said it expects to see the full-year revenue to rise at least 15%, to between $252 million and $266 million.
Analysts liked what they heard and started raising estimates. The Zacks Consensus Estimates for this year rose 3 cents to $0.90. Next year's average estimate is up 8 cents, to $1.22. Both year's have seen upward revisions in the past 7 days as well. Given the $0.66 earned per share last year, the expected growth rates are 36% and 35%.
Analysts are cautious in general so when we see estimates move higher just ahead of a quarterly report it gives investors some optimism. The next report is due out on Aug 1.
Shares of VRTU are going for 23 times forward earnings, not too great but if you factor in that 23% long-term growth rate you get a PEG of 1.0, which is a solid value.
On Jul 5 Virtusa bought ALaS Consulting, which provides consulting and advisory services in the financial sector. The deal adds a new arena to the company's diverse areas of expertise. Virtusa used $28 million in cash for the purchase.
Shares are pressuring recently set highs and if they can manage to get past this level there is plenty of upside for this Zacks #1 Rank (Strong Buy).
Bill Wilton is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Small Cap Trader service