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ExlService Holdings

by Bill Wilton

November 09, 2011 | Comments : 0 Recommended this article: (0)

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Can you get outsized returns from an outsourcing company? ExlService Holdings (EXLS - Snapshot Report) is showing excellent top-line growth, reported better than expected earnings, and is currently a Zacks #1 Rank (Strong Buy).

Company Description

ExlService provides outsourcing and transformation services. The company's primarily works with Fortune 1000 companies in the insurance, utilities, banking, transportation, and travel sectors.

Great Quarterly Results

ExlService reported third-quarter results on Nov 2 that included excellent revenue growth. The top line swelled 48% year-over-year and 18% sequentially, to $100 million.

Net income was $8.4 million, up from $7.8 million a year ago. That put EPS at $0.30, 7 cents higher than the Zacks Consensus Estimate.

Optimism All Around

After ExlService raised its full-year outlook in the earnings release, analysts took note. The average estimate for this year is up 11 cents, to $1.13. Next year's Zacks Consensus Estimate is up 22 cents, to $1.25.

In 2010 the company brought in $0.92 per share, so the current growth rates are at 23% and 11%, respectively.

Valuations

The stock is trading at 21 times next year's estimates and an 17.7% long-term growth rate gives it a PEG of 1.2. Those metrics show decent pricing considering the solid growth rate. The price to sales is high at 2.7 and EXLS is going for just under 3 times book value.

Earnings Trend

While the estimates for each particular year seem to fluctuate, that is forgivable given the solid year over year growth. Also, some of those changes are due to analysts adding and dropping coverage, which has more of an impact on stocks with less covering analysts.

ExlService Holdings - ticker EXLS>
 
 
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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

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