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Editor's note: This article initially referred to EPAM's string of consecutive earnings misses without specifying which set of estimates the company had missed. We have now clarified that the miss was relative to Zacks consensus earnings estimates.

EPAM Systems (EPAM) has a downright lousy history of beating the Zacks earnings consensus estimate, but that is about to change. This custom IT services and solutions provider has cracked the code and is our Bull of the Day.

CFO Change

Normally, if I see a CFO is leaving a company I tend to sell first and ask questions later. In the case of EPAM Systems, their CFO is leaving and being replaced by the current VP of Finance and compliance officer. So congratulations to Anthony Conte, a six-year veteran of the company who has a firm grasp of what is going on at EPAM.

Company Description

EPAM is an IT services and custom solutions provider. They offer software development services, engineering and custom solutions for medium and large businesses worldwide. The company primarily serves banking, financial services, business information, media, travel and hospitality industries. EPAM Systems, Inc. is headquartered in Newtown, Pennsylvania.

One Is The Loneliest Number of Beats

EPAM did beat the number once. But that was the first report that Zacks has data on for the December 2011 quarter. It was a $0.02 beat or 7% positive earnings surprise and that sent shares higher by more than 17% in the trading session following the report.

That beat was followed up with six consecutive earnings misses of the Zacks earnings consensus estimate. A string that started with the March 2012 quarter and runs right through the September 2013 quarter.

Management Reboot, Guiding Higher

I noted that the company had cracked the code and investors should look forward to a positive earnings surprise on November 8, 2013 when they next report earnings. This proclamation is an easy one to make given the fact the company raised guidance on October 9, 2013 in the same announcement that detailed the management change.

Management knows that if you are going to guide higher, the worst thing you can do is then miss earnings. Analysts certainly don't expect the company to miss, and as a result of the increased guidance they have moved their EPS estimates higher.

Estimates Moving Higher

Even before the company raised its guidance, analysts saw some good things developing. The Zacks Consensus for the upcoming quarter stood at $0.33 in early August. By the middle of September, it had ticked higher by a penny. The increased guidance announcement sent shares to their current level of $0.35.

The following quarter has seen fraction moves higher in the consensus, so a slight increase by only one analyst could result in a higher consensus number.

Target Price Bumped Up

Stifel raised its target price on shares of EPAM from $38 to $42 as they believe there is potential upside. A key concern had been stability in margins, but the brokerage believes the management change will address that. They also pointed to the pre-announced earnings as a positive factor.

Valuation

The valuation for EPAM isn't what you would expect for a company that has had six straight earnings misses. A 31x trailing PE multiple is higher than the 24x industry average, just as the 29x forward multiple tops the 23x industry average. Price to book is mostly in line with the industry average but the price to sales multiple show EPAM trading at a discount to the industry average. With revenue growth for 2014 expected to be 20%, EPAM is growing much faster than the industry average of 7.8% and they are growing the bottom line faster too. The company is expected to produce nearly 25% growth in earnings next year compared to a 14% rate for the industry average.

The Chart

Normally a chart of the stock price is what helps wrap the story up, but I want to go a different direction with this one. Instead of stock price graph, I am showing a graph of the revenue over the last few quarters. This graph just what aggressive growth investors like to see, a nearly 45 degree angle. That sort of consistent growth, coupled with better managed expectations should make investors more willing to take a deeper look at EPAM.

Brian Bolan is a Stock Strategist for Zacks.com. He is the Editor in charge of the Zacks Home Run Investor service, a Buy and Hold service where he recommends the stocks in the portfolio.

Source: Bull Of The Day: EPAM Systems