Why ExlService Holdings Shares Nosedived

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 ExlService Holdings (NAS: EXLS) , an outsourcing and transformation company, crashed through the floor this morning, down as much as 27% at one point, following its first-quarter results.

So what: For the quarter, EXL reported strong revenue growth of 43% to $104.6 million due to strong new client and organic growth, as well as expense reductions. Adjusted earnings rose 10% to $0.36. Both of these figures were in line with what Wall Street had been expecting, as was the company's EPS guidance for the remainder of the year, which it left unchanged at $1.50 to $1.55. Where EXL did fall short was on its revenue guidance, where it noted that it would likely come in at the bottom end of previous guidance: $445 million to $455 million. The company cited rupee depreciation and delays from its clients as the primary reasons for the expected shortfall.

Now what: This wasn't a stellar earnings report, but it wasn't loaded with damning figures, either. Currency fluctuations aren't very controllable, so I'd be more concerned with the project delays from EXL's customers. Overall, revenue grew like a weed, and profits were up year over year despite the rupee's depreciation. With EXL now down only 9% as of this writing, the move lower makes considerably more sense (more so than a 27% drop). I still can't say I'm a fan of outsourcing companies, but this might deserve a spot on My Watchlist.

Craving more input? Start by adding ExlService Holdings to your free and personalized watchlist so you can keep up on the latest news with the company.

At the time thisarticle was published Fool contributorSean Williamshas no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen nameTMFUltraLong, track every pick he makes under the screen nameTrackUltraLong, and check him out on Twitter, where he goes by the handle@TMFUltraLong.Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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