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Category: Stock Market and Virtusa
Date: 14 May 2020 Stock Price: $31.76 We take a look at the 4th quarter earnings release of their 2020 fiscal year of Virtusa a digital business strategy and information technology services provider.
Our priorities since the onset of the COVID-19 pandemic have been to protect the health and safety of our global team members and their families, and proactively work with our clients to help them navigate this uncertain time " |
About Virtusa
Virtusa Corporation (NASDAQ GS: VRTU) is a global provider of digital business strategy, digital engineering, and information technology (IT) services and solutions that help clients change, disrupt, and unlock new value through innovation engineering. Virtusa serves Global 2000 companies in Banking, Financial Services, Insurance, Healthcare, Communications, Media, Entertainment, Travel, Manufacturing, and Technology industries. Virtusa helps clients grow their business with innovative products and services that create operational efficiency using digital labor, future-proof operational and IT platforms, and rationalization and modernization of IT applications infrastructure. This is achieved through a unique approach blending deep contextual expertise, empowered agile teams, and measurably better engineering to create holistic solutions that drive business forward at unparalleled velocity enabled by a culture of cooperative disruption.
Overview of Virtusa's 4th quarter 2020 earnings report
The data below refers to the most recent quarter unless specified otherwise:
- Revenues: $329.651 million (down from $327.631 million for the same quarter of the previous year)
- Revenue increased by -0.6% over the last 12 months
- Cost of revenues : $249.397 million (up from $230.364 million for the same quarter of the previous year)
- Cost of revenues increased by 8.3% over the last 12 months
- Margin pressure for Virtusa with their revenues declining while their cost of revenues increased
- Net earnings: $21.158 million (up from $7.273 million for the same quarter of the previous year)
- Diluted earnings per share: $0.66 (up from $0.24 for the same quarter of the previous year)
- PE ratio of Virtusa : 13.2
- Diluted weighted-average shares outstanding: 33.517 million (down from 30.844 million for the same quarter of the previous year)
- Cash and cash equivalents: $290.837 million
- Cash and cash equivalents per share: $6.88
- Cash and cash equivalents makes up 11.8% of Virtusa's market capital
- Cash and cash equivalents makes up 8.7% of Virtusa's total assets
- Stockholders equity in Virtusa : $397.441 million
- Stockholders equity per share: $11.85
- So Virtusa is trading at 2.68 times its stockholders equity per share, which is within the expected range of between 2 and 4 times that most firms tend to trade at.
- For perspective the average price to book value of firms in the S&P 500 is 3.7 times. Read more about the S&P500 here
Virtusa's management commentary on their 1st quarter 2020 earnings report
SOUTHBOROUGH, Mass.--(BUSINESS WIRE)--May 13, 2020-- Virtusa Corporation (NASDAQ GS: VRTU), a global provider of digital strategy, digital engineering and IT services and solutions that help clients change and disrupt markets through innovation engineering, today reported consolidated financial results for the fourth quarter and fiscal year ended March 31, 2020.
Kris Canekeratne, Virtusa’s Chairman and CEO, stated, “Our priorities since the onset of the COVID-19 pandemic have been to protect the health and safety of our global team members and their families, and proactively work with our clients to help them navigate this uncertain time. I am incredibly proud of all our global team members for quickly adapting to this evolving situation, and going above-and-beyond to ensure Virtusa serves as an agile and trusted partner that can address our clients’ most critical technology needs at any time and under any circumstance. Notwithstanding the current economic turbulence, our leading end-to-end Digital Transformation and Cloud Transformation capabilities position us well, and will enable us to emerge faster when the market begins to recover. We are confident that Virtusa will rise to this challenge and come out on the other side a stronger company.” Ranjan Kalia, Chief Financial Officer, said, “Our fiscal fourth quarter results reflect the impacts from COVID-19 on our business and our clients. We have responded to the current situation, and ongoing uncertainty, by increasing our focus on cost reductions and improving our financial flexibility, while investing in those areas where we see the greatest opportunity for long-term growth. While our financial performance in fiscal year 2021 will be impacted by the effects of COVID-19, we remain confident in our ability to achieve our long-term objectives of greater than industry revenue growth and EPS growth greater than the top-line as current economic headwinds abate.”
Kris Canekeratne, Virtusa’s Chairman and CEO, stated, “Our priorities since the onset of the COVID-19 pandemic have been to protect the health and safety of our global team members and their families, and proactively work with our clients to help them navigate this uncertain time. I am incredibly proud of all our global team members for quickly adapting to this evolving situation, and going above-and-beyond to ensure Virtusa serves as an agile and trusted partner that can address our clients’ most critical technology needs at any time and under any circumstance. Notwithstanding the current economic turbulence, our leading end-to-end Digital Transformation and Cloud Transformation capabilities position us well, and will enable us to emerge faster when the market begins to recover. We are confident that Virtusa will rise to this challenge and come out on the other side a stronger company.” Ranjan Kalia, Chief Financial Officer, said, “Our fiscal fourth quarter results reflect the impacts from COVID-19 on our business and our clients. We have responded to the current situation, and ongoing uncertainty, by increasing our focus on cost reductions and improving our financial flexibility, while investing in those areas where we see the greatest opportunity for long-term growth. While our financial performance in fiscal year 2021 will be impacted by the effects of COVID-19, we remain confident in our ability to achieve our long-term objectives of greater than industry revenue growth and EPS growth greater than the top-line as current economic headwinds abate.”
COVID-19 Response
In response to the COVID-19 pandemic, Virtusa quickly initiated a rigorous plan to protect the health and safety of its global team members, while continuing to serve clients in a safe and sustainable manner. As the world faces unprecedented challenges caused by COVID-19, Virtusa is committed to doing everything possible to help our team members and clients manage through these turbulent times. Recent actions include: Enacted a Work-From-Home policy starting March 9, 2020. Today, 98% of Virtusa’s global billable team members are enabled to work from home. Daily sessions between Virtusa’s Crisis Management and Business Continuity teams to ensure employee safety and consistent client delivery. Proactively launched a series of new services and solutions tailored to help clients address the challenges created by COVID-19, including Hyper Distributed Agile Services, Agile Squads, and Release Assurance. Implemented a comprehensive cost reduction and efficiency plan across delivery, shared services and professional services. Proactively increased readily available cash by drawing down $84 million under its credit facility and moving $25 million from its India entity to the U.S. without tax implications.
Financial Outlook
"The depth and duration of the economic impact from COVID-19 on Virtusa and our clients’ businesses are unknown. Given the uncertainties surrounding COVID-19, we have temporarily suspended our financial guidance for fiscal year 2021,” said Ranjan Kalia, Chief Financial Officer. In accordance with US GAAP, Virtusa applies the if-converted method to its convertible preferred shares when reporting its fiscal year 2020 results. The if-converted method is used to calculate the share impact of convertible securities. Under this method, only when the convertible securities are considered dilutive are they then included in the computation of weighted average shares outstanding in reported results and full year guidance.
In response to the COVID-19 pandemic, Virtusa quickly initiated a rigorous plan to protect the health and safety of its global team members, while continuing to serve clients in a safe and sustainable manner. As the world faces unprecedented challenges caused by COVID-19, Virtusa is committed to doing everything possible to help our team members and clients manage through these turbulent times. Recent actions include: Enacted a Work-From-Home policy starting March 9, 2020. Today, 98% of Virtusa’s global billable team members are enabled to work from home. Daily sessions between Virtusa’s Crisis Management and Business Continuity teams to ensure employee safety and consistent client delivery. Proactively launched a series of new services and solutions tailored to help clients address the challenges created by COVID-19, including Hyper Distributed Agile Services, Agile Squads, and Release Assurance. Implemented a comprehensive cost reduction and efficiency plan across delivery, shared services and professional services. Proactively increased readily available cash by drawing down $84 million under its credit facility and moving $25 million from its India entity to the U.S. without tax implications.
Financial Outlook
"The depth and duration of the economic impact from COVID-19 on Virtusa and our clients’ businesses are unknown. Given the uncertainties surrounding COVID-19, we have temporarily suspended our financial guidance for fiscal year 2021,” said Ranjan Kalia, Chief Financial Officer. In accordance with US GAAP, Virtusa applies the if-converted method to its convertible preferred shares when reporting its fiscal year 2020 results. The if-converted method is used to calculate the share impact of convertible securities. Under this method, only when the convertible securities are considered dilutive are they then included in the computation of weighted average shares outstanding in reported results and full year guidance.
Virtusa (NASDAQ: VRTU) stock price history
The image below, obtained from Google, shows the stock price history of Virtusa (NASDAQ: VRTU) over the last 5 years. And it's not been a good time for Virtusa stockholders. 5 years ago the stock of Vitusa was trading at $45.70 and its currently trading at $31.76. Thats a loss of -30.5% suffered by Virtusa stockholders
Virtusa stock is trading at closer to its 52 week low of $19.48 than it is from its 52 week high of $54.41 which to us is a clear indication that the short term sentiment and momentum of Virtusa stock is very negative at this point in time.
Virtusa stock is trading at closer to its 52 week low of $19.48 than it is from its 52 week high of $54.41 which to us is a clear indication that the short term sentiment and momentum of Virtusa stock is very negative at this point in time.
Recent coverage of Virtusa
The extract below shows recent coverage of Allegiant as obtained from Finance.yahoo.com
Virtusa (VRTU) came out with quarterly earnings of $0.41 per share, missing the Zacks Consensus Estimate of $0.59 per share. This compares to earnings of $0.46 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of -30.51%. A quarter ago, it was expected that this provider of information technology services would post earnings of $0.76 per share when it actually produced earnings of $0.78, delivering a surprise of 2.63%.
Over the last four quarters, the company has surpassed consensus EPS estimates three times. Virtusa, which belongs to the Zacks Computer - Services industry, posted revenues of $329.65 million for the quarter ended March 2020, missing the Zacks Consensus Estimate by 0.10%. This compares to year-ago revenues of $327.63 million. The company has topped consensus revenue estimates two times over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call.
Read the full article here
Virtusa (VRTU) came out with quarterly earnings of $0.41 per share, missing the Zacks Consensus Estimate of $0.59 per share. This compares to earnings of $0.46 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of -30.51%. A quarter ago, it was expected that this provider of information technology services would post earnings of $0.76 per share when it actually produced earnings of $0.78, delivering a surprise of 2.63%.
Over the last four quarters, the company has surpassed consensus EPS estimates three times. Virtusa, which belongs to the Zacks Computer - Services industry, posted revenues of $329.65 million for the quarter ended March 2020, missing the Zacks Consensus Estimate by 0.10%. This compares to year-ago revenues of $327.63 million. The company has topped consensus revenue estimates two times over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call.
Read the full article here
Virtusa (NASDAQ: VRTU) latest stock valuation
So based on Virtusa's 4th quarter 2021 earnings report what do we value Virtusa stock at? Based on the latest earnings report of Virtus our valuation model provides a target price of $40.90 per Virtusa stock.
We therefore believe that the stock of Virtusa is undervalued. We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price, which in this case is $40.90. A good entry price into Virtusa stock would therefore be at $36.80 or below.
We expect the stock of Virtusa to kick up from current levels to levels closer to our target price in coming weeks and months.
We therefore believe that the stock of Virtusa is undervalued. We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price, which in this case is $40.90. A good entry price into Virtusa stock would therefore be at $36.80 or below.
We expect the stock of Virtusa to kick up from current levels to levels closer to our target price in coming weeks and months.
Next earnings release of Virtusa
It is expected that Virtusa will release their 1st quarter 2021 earnings release in mid August 2020