Why iGATE Corporation Shares Plunged

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of iGATE Corporation (NASDAQ: IGTE  ) plunged as much as 10% during Thursday's intraday trading after the company beat quarterly earnings and revenue expectations, but management made cautious statements regarding revenue and margins in the first half of 2014.

So what: Quarterly net revenue rose 10.2% year over year to $299.3 million, which translated to an 8.9% increase in adjusted net income to $0.49 per share. By contrast, analysts were modeling earnings of $0.48 per share on sales of $296.14 million.

However, while iGATE doesn't typically provide formal guidance, CEO Ashok Vemuri commented his company is "expecting fairly small sequential growth" for the first half of 2014, thanks to a combination of normal seasonality and "some large programs coming to their natural conclusions." In addition, Vemuri said he expects iGATE to continue to strategically scale back some of its smaller accounts to focus on those with "meaningful opportunity for expansion."

Finally, Vemuri asserted gross margin will continue gradually declining in the first half of 2014 (from around current levels at 39.8%) as iGATE ramps up investments to expand its physical infrastructure. With this in mind, gross margin should also return back to more normal levels in the 40% range toward the end of 2014.

Now what: iGATE added nine new customers in Q4, including five Fortune 1000 companies, so the value propositions of its offerings look intriguing. What's more, though it'll take some time to bear fruit, I certainly can't fault the company's efforts to invest in long-term growth.

But the stock still doesn't look particularly intriguing as it trades around 34 last year's earnings and 18 times next year's estimates. At the very least, then, I think investors would do well to add shares of iGATE Corporation to their watchlists. If the company's investments prove effective, its stock could reward patient investors down the road.

Consider the 6 amazing growth stocks in this free report
In the meantime, there are plenty of other great growth stocks on which you can put your money to work. So where should you look?

Consider the investing wisdom of Motley Fool co-founder David Gardner, who has proved skeptics wrong time, and time, and time again with stock returns like 926%, 2,239%, and 4,371%. In fact, just recently one of his favorite stocks became a 100-bagger. And he's ready to do it again. You can uncover his scientific approach to crushing the market and his carefully chosen 6 picks for ultimate growth instantly, because he's making this premium report free for you today. Click here now for access.

Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2798400, ~/Articles/ArticleHandler.aspx, 9/1/2015 12:01:45 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Steve Symington

Technology and consumer goods specialist for the Fool. Steve looks for responsible businesses which positively shape our lives. Then, he invests accordingly. Enjoy his work? Connect with him on Twitter & Facebook so you don't miss a thing.

Today's Market

updated 2 hours ago Sponsored by:
DOW 16,528.03 -114.98 -0.69%
S&P 500 1,972.18 -16.69 -0.84%
NASD 4,776.51 -51.82 -1.07%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

12/31/1969 7:00 PM
IGTE $0.00 Down +0.00 +0.00%
iGATE Corp CAPS Rating: ***