Virtusa Corporation (NASDAQ:VRTU)
The company reported its third-quarter 2013 results that were in-line with the expectations of the street. For the quarter, it had a revenue of $86.5 million (up by about 20% year-over-year) against the consensus estimate of $85.5 million. The company acquired three new clients in the quarter, thereby meeting its goal of adding three to five new clients every quarter. The growth in revenue was mainly because of the expansion in its top three clients.
The top three customers of the company; JPMorgan Chase, British Telecom, and a large insurance company, which contribute more than 10% of the company’s revenue. In the last-quarter, business with JPMorgan was up by 7% sequentially, evidence that Virtusa is growing its relationship with the company and this should drive additional opportunities to expand its wallet share over the next two to three quarters. Virtusa helped in rationalization of JPMorgan’s online banking and mobile services.
In the last quarter, strong momentum from the European region was driven by Virtusa’s dealings with British Telecom. Despite the IT budget cuts at British Telecom, the company was able to expand its penetration. It continues to gain good wallet share, and should grow sequentially in the fourth quarter as well. Virtusa’s relationship with British Telecom has given it a preferred vendor status. According to which, it maintains the terms of the previous master service agreement they had, but allows it to compete for larger deals.
The company’s top 10 clients contribute around 62% to its revenue; and a strong relationship with them provides clarity and stability to Virtusa’s future.
The takeaway
With economic conditions settling and expected increment in IT spending; I feel that the IT industry has a lot of potential to grow. Here’s a quick look at how the above three stocks can materialize the growth:
Cognizant Technology Solutions Corp (NASDAQ:CTSH)’s growing European region and Horizon initiatives coupled with the past performance make me bullish about the stock.
Capital allocation plans make Accenture a lucrative stock, and a strong customer base and increasing inclination towards the emerging markets should aid its performance.
Virtusa is relatively smaller in comparison to Cognizant Technology Solutions Corp (NASDAQ:CTSH) and Accenture Plc (NYSE:ACN), but nevertheless the increasing penetration of the company in its top clients strengthens my faith in the company.
The article 3 IT Stocks to Buy in 2013 originally appeared on Fool.com and is written by Madhu Dube.
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