Chinese IT Stock Really Shining
Monday, June 2nd, 2008
By Mitchell Clark, B.Comm. for Profit Confidential
If you find a stock that’s doing better than the broader market, it’s always worthy of further investigation.
One recent IPO that looks very interesting is VanceInfo Technologies, Inc. (NYSE/VIT). This small-cap company listed just as the stock market began its correction late last year. Recently, the stock broke out of its rut after the company reported excellent financial growth. The stock has gone up, but it is still reasonably valued by any measure.
VanceInfo is an information technology (IT) service provider and software development company located in China. According to the company, it is ranked among the top three Chinese offshore software development service providers for the North American and European markets as measured by 2006 revenues.
The company sells a range of IT services that include research and development services, enterprise software solutions, application development and maintenance, quality assurance and testing, as well as globalization and localization.
VanceInfo provides these services primarily to corporations headquartered in the United States, Europe, Japan and China. The company’s customers are often in the technology, telecommunications, financial services, manufacturing, and retail industries.
According to VanceInfo, its revenues in the first quarter of 2008 grew to twenty and a half million dollars, representing growth of 97% from revenues of just over ten million dollars generated in the first quarter of 2007.
Company management cited that, during the quarter, it won a number of new customers, a lot of which were referrals from existing clients.
VanceInfo reported that the U.S. market continued to be its largest geographic market, accounting for more than twelve and a half million, or about 62% of revenues, in the first quarter of 2008. This was followed by 13% for Europe, 13% for China, and almost 13% for Japan.
Revenues from the company’s two largest clients, Microsoft and IBM, accounted for 31% of total revenues in the first quarter of 2008, down significantly from 46% in the first quarter of 2007. Revenues from VanceInfo’s top five customers came to 51%, down from 66% in the first quarter of 2007.
Net income was $3.1 million, representing a large gain of 138% from net income of $1.3 million generated in the first quarter of 2007.
Currently, VanceInfo expects its total 2008 revenues to be between ninety-two million dollars and ninety-six million dollars, representing a 47% to 53% increase over 2007 revenues. One hundred million dollars a year in sales is always an important barrier for a small company. Once the company breaks this level, it has the critical mass to really go after big accounts. It also makes the company much more attractive as a takeover candidate.
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Mitchell is a Senior Editor at Lombardi Financial specializing in small-cap stocks. He’s the editor of a variety of popular Lombardi Financial newsletters, such as Penny Stock Reporter, Micro-Cap Stocks, and Monster Profits. Mitchell, who has been with Lombardi Financial for thirteen years, won the Jack Madden Prize in economic history and is a long-time student of equity markets. Prior to joining Lombardi, Mitchell was as a stock broker for a large investment bank. While Mitchell is not working he enjoys fly fishing, motorcycling and tending to his hobby farm.
