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Infosys Hits 52-Week High

Zacks Equity Research

Shares of Infosys Ltd. (INFY) hit a 52-week high of $57.25 during Tuesday’s trading session. However, the stock closed the session at $57.15, reflecting a solid year-to-date return of 33.3%. The average trading volume for the last three months aggregated 850,666 shares.

Infosys delivered positive earnings surprises in the last four quarters with an average beat of 5.27%. This Zacks Rank #3 (Hold) company has a market cap of $32.7 billion with long-term earnings growth expectations of 13.4%.

Growth Drivers

Infosys has a strong balance sheet and generates a substantial cash flow. In the last quarter, the company reported higher revenues across its businesses and regions. In addition, positive estimate revisions, strong client additions, and new deals are some of the catalysts driving the stock.

On Oct 11, Infosys reported modest second-quarter 2014 results with the  top-line increasing 15.0% year over year and 3.8% sequentially. The company witnessed volume growth, client additions, won five large deals and increased sales momentum in its big data and cloud offerings. In addition, the company had a sound and flexible balance sheet with ample liquidity to capitalize on potential acquisition opportunities and 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% versus 6% to 10% anticipated earlier.

Recently, Infosys under its Infosys McCamish Systems LLC wing has launched an innovative customer service platform named VPAS Customer Service Work Desk (:CSWD) to leverage its BPO business by enhancing operational excellence and customer experience.

Furthermore, its co-founder Narayana Murthy, who rejoined in Jun 2013, outlined some strategies to bring the company back on its profit-making track. The initiatives set by Murthy primarily focus on winning large deals while maintaining market share through a cost-optimization strategy. In addition, Murthy has also emphasized on improving employee morale through efficient rewards to retain human capital.

Estimate Revisions

Over the last 7 days, earnings estimates for Infosys did not show any upward or downward revision for 2013. Although there is a lacuna of estimate revisions, we envision an uptrend for the stock backed by its strong growth potential.

Other Stocks to Consider

Some other favorably-ranked stocks operating in the industry include Amdocs Ltd (DOX), Cognizant Technology Solutions Corporation (CTSH) and CoStar Group Inc. (CSGP). All three stocks carry a Zacks Rank #2 (Buy).

Read the Full Research Report on CTSH
Read the Full Research Report on INFY
Read the Full Research Report on DOX
Read the Full Research Report on CSGP

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