Answer questions about the Sustainability of iGATE's returns, its Earnings Leverage and other fundamentals with this free report.
Based on the company's preliminary financial results for the quarter ended 2013-09-30 we provide a peer-based earnings analysis of the company (see the end of this post for the peer list). Our analysis is based on the company's performance over the last twelve months (unless stated otherwise). The table below shows the preliminary results along with the recent trend for revenues, net income and returns.
| Quarterly (USD million) | 2013-09-30 | 2013-06-30 | 2013-03-31 | 2012-12-31 | 2012-09-30 |
|---|---|---|---|---|---|
| Revenues | 293.4 | 283.3 | 274.9 | 271.6 | 271.1 |
| Revenue Growth % | 3.6 | 3.0 | 1.2 | 0.2 | 1.2 |
| Net Income | 31.8 | 29.9 | 34.6 | 30.7 | 28.2 |
| Net Income Growth % | 6.4 | (13.8) | 12.8 | 9.0 | 124.6 |
| Net Margin % | 10.8 | 10.5 | 12.6 | 11.3 | 10.4 |
| ROE % (Annualized) | 389.5 | 112.1 | 117.9 | 116.7 | 230.8 |
| ROA % (Annualized) | 8.0 | 6.9 | 7.4 | 6.5 | 6.2 |
Margin Driven Operating Model
iGATE Corporation's current Price/Book of 72.8 is about average in its peer group. IGTE achieved a better operating performance than the average of its chosen peers (ROE of 218.3% compared to the average ROE of 15.5%) and the market still expects faster growth from it than from those peers (PE of 21.3 compared to peer average of 17.7).
The company's relatively high profit margins (currently 11.3% vs. peer average of 5.8%) are burdened by asset inefficiency with asset turns of 0.6x compared to the peer average of 1.3x. Overall, this suggests a margin driven operating model relative to its peers. IGTE's net margin continues to trend upward but is still within one standard deviation below its five-year average net margin of 12.4%.
Superior Growth Prospects
IGTE has grown its revenues faster than its peers (77.2% vs. 15.5% respectively for the past three years). The market also sees relatively higher long-term growth prospects for the company, giving it a better than peer average PE ratio of 21.3. Overall, we classify the company's growth prospects as superior relative to its peers.
IGTE's annualized rate of change in capital of 102.6% over the past three years is greater than the average of 8.5%. However, this investment level has only generated a peer average return on capital of 12.4% averaged over the same three years. This average return on an above average capital investment suggests the company is overinvesting.
Earnings Quality
iGATE Corporation has reported relatively strong net income margin for the last twelve months (11.3% vs. peer average of 5.8%). This strong margin performance was accompanied by a level of accruals that was around peer average (-0.4% vs. peer average of -0.4%) suggesting that the reported net income is supported by a reasonable level of accruals.
IGTE's accruals over the last twelve months are around zero. This level is also around the peer average suggesting a proper level of reserves.
iGATE Corporation IGTE Trend Charts
Peers
We used the following peer set for our earnings analysis of iGATE Corporation: Computer Sciences Corporation (NYSE: CSC), Harman International Industries, Incorporated (NYSE: HAR), Syntel, incorporated (NASDAQ: SYNT), Sapient Corporation (NASDAQ: SAPE), Computer Task Group, Incorporated (NASDAQ: CTG) and Toa Corporation (TOKYO:6809).
Answer questions about the Sustainability of iGATE's returns, its Earnings Leverage and other fundamentals with this free report.
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