Why iGATE Shares Popped

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 software company iGATE (NAS: IGTE) climbed as high as 10% on Friday after the company's first-quarter profit easily topped Wall Street expectations.

So what: iGATE's first-quarter earnings beat was so wide -- adjusted EPS of $0.38 versus the consensus of $0.32 -- that analysts have no choice but to raise their growth expectations on the stock. In fact, profits jumped 35% even as several project delays weighed on revenue and margins, suggesting that the company's earnings power is stronger than Wall Street had thought.

Now what: Don't let today's pop keep you from looking into the stock. "We expect our revenue growth to be back on track over the next couple of quarters creating a back loaded year," forecasted CEO Phaneesh Murthy. More important, with the stock still trading at a cheapish forward P/E of 11, buying into that optimism won't come at a huge price.  

Interested in more info oniGATE?Add it to your watchlist.

At the time this article was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story