Small Stock Wowing Investors

Back in June, I wrote in this column about a very interesting information technology (IT) company called VanceInfo Technologies, Inc. (NYSE/VIT).

This firm is an 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.

VanceInfo sells a range of IT services that include research and development services, enterprise software solutions, application development and maintenance, quality assurance, and software testing, among other things. The company provides these services primarily to corporations headquartered in the United States, Europe, Japan and China. Its customers are usually in the technology, telecommunications, financial services, manufacturing, and retail industries.

VanceInfo Technologies is a company experiencing substantial growth serving large American corporations that want cheaper IT expenditures. Call it outsourcing or whatever you want. It’s happening in just about every industry.

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The company announced that its revenues were a record $24.4 million in the second quarter of 2008, representing a 63% gain over revenues of fifteen million dollars generated in the second quarter of 2007.

According to VanceInfo, the increase in revenues was mainly due to significant growth from a number of new clients. Total revenues from the company’s two largest clients, Microsoft and IBM, accounted for about 30% of total revenues in the quarter.

Net income in the second quarter of 2008 was a solid $3.6 million, representing a gain of 57% over net income of $2.3 million in the second quarter of 2007.

Looking ahead, VanceInfo expects to generate sales of between twenty-five million dollars and twenty-six million dollars in the third quarter of 2008, representing a 39% to 44% increase from the third quarter of 2007.

For all of 2008, the company just increased its guidance, and it expects revenues to be between ninety-six million dollars and ninety-nine million dollars, representing a 53% to 58% increase over 2007.

I think this company can become a great success over the next several years. The stock is a relatively new listing on the NYSE. Also, I always get more interested in a small company when it crosses the one-hundred-million-dollar mark in annual sales. This gives a company the critical mass necessary to go after large corporate customers, as well as making it more attractive as a takeover candidate. I think VanceInfo Technologies has a bright future ahead.