Why You Should Take Interest in Infosys

Josef Ray is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

India-based software group Infosys (NYSE: INFY) very recently made its debut via American Depositary Shares in the New York Stock Exchange last December. Just this month, it announced a partnership with medical company Novasom Inc towards the improved efficiency of the latter’s home tests. Infosys is also the developer of Salesforce.com’s Meditrack, a user portal that widens the reach and enhance the effectiveness of Novasom’s diagnostic solutions. The Infosys-made portal serves physicians via a unified and convenient interface that improves insurance claim management, data processing, plus the ordering and delivery process of Novasom’s devices. Should this greenhorn company be on your list of stocks to watch and buy?

How It Trades

The middle of last week, specifically Jan. 16, investors saw Infosys shares drop by 1.79% and close at $51. On Jan. 18, it closed at a relatively healthier $52.21, up $0.08, or 15%, from the day previous. The company's low for the past 52 weeks was $37.93, and its peak was $60.86.

Large Gains

The last quarter of 2012 saw Infosys garner increased revenue of approximately $1.9 billion, an improvement of about 5.8% from the same period in 2011. The fiscal year ending March 31 of this year comes with a company forecast of more than $7.45 billion in expected earnings. Its long-term performance is much stronger than both the company and external analysts predicted, which is likely to have contributed to how favorably the stock is currently faring over the short-term. The aforementioned earnings partly depend on more than $100 million from its most recent acquisition, Switzerland-based consulting group Lodestone Holdings, and will result in the company increasing its revenue by an overall 6.6% from last year, with earlier forecasts only predicting an increase of five percent.

Cloud Computing Rivals

When it comes to technology and cloud computing, there are very few companies that are more impressive and long-lived than International Business Machines (NYSE: IBM). The New-York-based computer giant is currently collaborating with firebrand CohesiveFT to develop SDN, or software-defined networking, in addition to applications towards cloud data transfers and more towards easier information sharing to and from offsite data sources. Jan. 17 saw IBM stock climb by 0.05% and close at a hefty $192.59, with 2.96 million shares in total volume and an average volume of 3.85 million. The stock’s market cap is $217.61, and has a fifty-two week low of $179.32 and a high of $211.79. An upcoming earnings report pegs revenue at more than $29 billion, earnings per share of $5.25, and a profit that increased to $15.14 billion in 2012 from 2011’s $13.44 billion.

Another India-based infotech company, however, does not seem to be as fortunate this year. Based in Bangalore, Wipro Limited (NYSE: WIT) started well enough last year and may now be recovering, but has yet to make headway in gains as it closed at $9.20 per share last Jan. 18. It might have stabilized enough to veer away considerably from its fifty-two-week low of $7.56, but still has a long way to go to reach its high of $11.49. However, it has still managed to top its earnings by 18% for the final quarter of last year, mainly due to global belt-tightening, driving business towards more cost-effective solutions such as those offered by Indian outsourcing companies.

The Verdict on Infosys

The second-largest software company in India may only be a fledgling in the American stock market, but the fact that it has not only met but raised sales estimates for the past year makes it a contender for stocks that you should be buying, if you haven’t already bought Infosys yet. Reports of plans to downsize with the termination of 5,000 employees should not deter investors to any extent. The addition of 53 clients in the last quarter alone shows that Infosys has arrived, and has no plans of stopping its superb performance any time soon – who knows how big they’ll get this year, and the years to come.


JosefRayDagatan has no position in any stocks mentioned. The Motley Fool owns shares of International Business Machines.. 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 Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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