) posted an earnings surprise of 20% in its fiscal first quarter,
as shares have climbed nearly 50% year to date. In addition to all
this, the Zacks #1 Rank (Strong Buy) provider of IT and enterprise
applications solutions remains significantly undervalued, as its
forward price-to-earnings (P/E) multiple and price-to-book (P/B)
multiple are significantly lower than industry averages.
NetSol's Superb Fiscal Q1
NetSol reported strong fiscal first quarter results on November 14,
including earnings per share of 12 cents that exceeded the Zacks
Consensus Estimate by 20%. The result also jumped sharply from last
year's loss of 30 cents.
Revenue advanced 77.8% from the year-ago quarter to $11.1 million,
a record first quarter sales for NetSol. License revenue was $3.2
million, compared with $1.1 million last year. Services revenue was
$5.8 million, compared with $3.1 million. Maintenance Fees remained
flat at $2.0 million.
Gross profit surged 148% year over year to $5.32 million, driven by
improved demand for NetSol products. Although operating expenses
soared 28.4%, NetSol reported operating profit of $1.5 million,
versus a loss of $0.8 million in the year-ago quarter.
The strong first quarter earnings and robust business pipeline
encouraged NetSol to reiterate its positive guidance for fiscal
2013. The company continues to forecast revenue of $46 million -
$49 million, with earnings per share in the range of 80 cents to
The Zacks Consensus Estimate for NetSol's fiscal 2013 is at 85
cents, reflecting earnings growth of 118.8% from 39 cents a year
ago. As for fiscal 2014, the Zacks Consensus Estimate has climbed
60% in the last 3 months to $1.12, reflecting 31% earnings growth
from the year-ago period.
Valuation Continues to Impress
NetSol's forward price-to-earnings (P/E) multiple of just 7.52 and
its price-to-book (P/B) multiple of 0.62 are significantly lower
than the industry averages of 21.44 and 2.54, respectively. The
stock looks attractive with respect to the price-to-sales (P/S)
multiple of 1.09, compared with industry average of 2.14. (A P/E
below 15.0, a P/S ratio less than 1.0 and a P/B ratio under 3.0
generally suggests a value stock.)
Moreover, NetSol's Return on Equity (ROE) of 6.6% and Return on
Investment (ROI) of 6.3% are in line with peer group averages,
while its Return on Asset (ROA) of 5.3% is better than the peer
group average of 4.5%.
Historically, earnings estimate revisions have had an impact on
Netsol's prices. The chart indicates an uptrend in 2013 and 2014
earnings estimates, which should encourage investors as the stock
is likely to follow the trend. Also, since shares have not reacted
to the positive estimate changes yet, upside appears likely in the
next few months.
Calabasas, California based NetSol Technologies offers the NetSol
Financial Suite ("NFS") for the global financing, leasing and
lending industry. It also offers customized application
development, systems integration, business process engineering
services and the smartOCI e-procurement search engine.
The company has an extensive global presence with offices in San
Francisco, London, Bangkok, Beijing and Lahore. NetSol's joint
ventures and strategic partnerships include names such as Oracle
), IBM (
), Microsoft Corp. (
) and SAP AG (
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