NetSol Upgraded to Strong Buy - Analyst Blog

On Mar 29, 2013, Zacks Investment Research upgraded NetSol Technologies Inc. (NTWK) to a Zacks Rank #1 (Strong Buy).

With a stellar second quarter 2013 performance, upcoming product launches, continuous deal wins and recent expansion in Australia, this provider of information technology (IT) and enterprise application solutions is an attractive investment opportunity. The stock's return was 267.8% in the past one year.

Why the Upgrade?

Positive news flow continued for NetSol over the past few months, prompting the upgrade.

In March, NetSol expanded its operations in Australia to make the most of the growing market opportunity in the broad equipment finance sector and improve service capability in the region.

In February, NetSol reported solid second quarter 2013 results with earnings per share of 28 cents, which surpassed the Zacks Consensus Estimate by 154.6% and the year- ago level by 366.7%. Revenues grew 37.2% year over year to $11.8 million. Revenue growth was supported by higher License and Maintenance revenues.

Operating margin increased to 24.6% from 14.2% in the year-ago quarter, mainly due to tight expense control.

For fiscal 2013, NetSol continues to expect total revenue in the range of $46.0–$49.0 million, with earnings per share between 80 cents and $1.00. The company also sees a strong product pipeline, order growth and improvements in Maintenance revenues for the second half of fiscal 2013.

Apart from this, NetSol kept on winning deals. In the past few months, the company's NetSol Financial Suite (NFS) has been deployed by a Fortune 500 global equipment manufacturer, a European auto captive finance company, a Japanese auto captive finance company and Mercedes-Benz Finance Co., Ltd. Japan.

The Zacks Consensus Estimate for 2013 increased 9.2% to 95 cents.

In the past four quarters, the company has posted an average surprise of 52.6%. Considering the above factors, NetSol has the potential to post a positive earnings surprise in the upcoming quarter.

Other Stocks to Consider:

Investors could also consider similar stocks that are doing well right now. These include Pegasystems Inc. (PEGA), Pervasive Sofwtare Inc. (PVSW) and Synopsys Inc. (SNPS) all carrying a Zacks Rank #1 (Strong Buy).