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PeopleSupport (NASDAQ: PSPT) provides business process outsourcing services from facilities in the Philippines. Company personnel handle customer service calls, technical support questions, marketing campaigns and collections. The firm also transcribes voice recordings and captions television content. Services are offered via telephone, e-mail and Web chat. Expedia (NASDAQ: EXPE) and Vonage Holdings (NYSE: VG) are major customers.
The firm surprised the Street earlier in the month, when it reported Q3 EPS of 27 cents and revenues of $36.9 million. Analysts
had been expecting 6 cents and $34.7 million. Management also guided Q4 EPS to 28-29 cents (4 cent consensus), Q4 revenues to $35.7-$36.5 million ($34.8M consensus), FY07 EPS to 84-85 cents (42 cent consensus) and FY07 revenues to $140.6-$141.4 million ($137.5M consensus). The stock popped on the news and then moved into a bullish "flag" consolidation pattern. Prices frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.
Brokers recommend the issue with five "buys" and seven "holds." Analysts see a 23% average annual growth rate, through the next five years. The PSPT P/E ratio (16.60), PEG ratio (0.73), Price to Sales ratio (2.14), Price to Book ratio (1.52), Price to Cash Flow ratio (10.38), Sales Growth rate (22.51%), EPS Growth rate (50.00%), Net Profit Margin (13.31%) and Return on Assets (10.64%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 88% of the outstanding shares. Over the past 52 weeks, the stock has traded between $8.19 and $24.41. A stop-loss of $11.00 looks good here.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.
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