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Friday, July 29, 2011

Safe Mid Cap Stock Idea

Here is one mid cap stock that is relatively safer compared to mid cap stocks space. NIIT Technologies, an IT stock with good growth rate could provide you very good investment returns in next 2-3 years.

NIIT Technologies is a mid-tier IT company providing IT solutions to customers aross North America, Europe, Middle East, Asia and Australia. It's services and solutions include application development and maintenance, managed services, cloud computing and business process outsourcing space to organisations across verticals. Revenue wise, Travel and transportation segment is single largest contributor(29%) while financial services and insurance contributes 37%, government segment contributes 18%, manufacturing and distribution 8% and rest is by all other segments.

Stock Financials
Company has reported almost 9% CAGR growth in topline and bottomline for past four years. Company's order book stands 15% higher at $169 million at the beginning of FY12 against the start of previous year. The maximum order intake was during the March 2011 quarter when company received fresh orders at $116 million were more than double the total number of orders in Dec.10 quarter.

Travel and transportation segment was the key growth driver during March 11 quarter with 12% sequential increase in total revenues to Rs 107 crore. Even with good growth, the company's operating profit margin was flat at 19.9%. Comapny has provided, on average, a 13% offshore and 3% onsite salary hike which could stress the margins in near future. But company operates at a utilisation level of above 80% which is higher compared to that of other IT companies.

Stock Valuations
NIIT Technologies is a consistent dividend paying stock with dividend yield of more than 4%!

At current stock price of Rs. 228, the stock trades at P/E of 12.11 for trailing four quarters EPS. Looking at the healthy order book lined up for execution in next one year, its' expected EPS in FY12 and FY13 is Rs.25 and Rs.35 resply. With same P/E of 12, NIIT technologies could touch Rs.300 in one year and Rs.400 in 2-3 years time frame if nothing drastically goes wrong for company.

One may buy stocks of NIIT Technologies at every dip in small quantities. It becomes very attractive if the stock trades around or below Rs.200.

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