Shares of Infosys Ltd. (INFY - Analyst Report) hit a 52-week high of $55.80 during Friday’s trading session. However, the stock closed the session at $55.48, reflecting a solid year-to-date return of 29.4%. The average trading volume for the last three months aggregated 1,236,850 shares.
Infosys delivered positive earnings surprises in the last four quarters with an average beat of 5.27%. This Zacks Rank #2 (Buy) company has a market cap of $31.7 billion and a long-term expected earnings growth rate of 13.4%.
Infosys has a strong balance sheet and generates a substantial cash flow. In the last quarter the company reported a strong top-line driven by higher revenues across its businesses and regions. In addition, positive estimate revisions, strong client additions especially from Fortune 500 companies and new deal wins are some of the catalysts driving the stock.
On Oct 11, Infosys reported modest second-quarter 2014 results with earnings declining 10.7% year over year primarily due to negative currency impact. However the company’s top-line rose 15.0% year over year and 3.8% sequentially.
The company witnessed volume growth, client additions, five large deal wins and increased sales momentum in its big data and cloud offerings. In addition, the company maintains a sound and flexible balance sheet with ample liquidity that enables it to capitalize on potential acquisition opportunities to fuel its top-line growth. Infosys has a pristine balance sheet, with more than $4.0 billion in cash & cash equivalents and no debt.
Driven by the strong top line growth in the second quarter, management increased its revenue guidance for fiscal 2014. Revenues are expected to increase in the range of 9% to 10% against 6% to 10% mentioned earlier.
This apart, its co-founder Narayana Murthy who joined the company in Jun 2013, outlined some strategies to bring the company back on its profit making track. The initiatives set by the Murthy primarily focus on winning large deals while maintaining the market share. Second, he focused on addressing the high costs of the company through a cost optimization strategy. In addition, Murthy also emphasized improving employee morale through efficient rewards.
Over the last 60 days, 7 out of 9 estimates for 2014 have been revised upward while only one estimate was revised lower, which led to a 2.1% rise in the Zacks Consensus Estimate to $2.96 per share. For 2015, 9 out of 10 estimates moved upward, helping the Zacks Consensus Estimate advance 5.2% to $3.24 per share
Other Stocks to Consider
Infosys currently has a short-term Zacks Rank #2 (Buy). Some other similarly- placed stocks operating in the industry include Amdocs Ltd (DOX - Analyst Report) , EPAM Systems, Inc. (EPAM - Snapshot Report) and CoStar Group Inc. (CSGP - Snapshot Report) . All three stocks carry a Zacks Rank #2 (Buy).