If you bring up the subject of IPO activity in 2012 to the average investor, the conversation is very likely to focus on the recent social media blowups of Facebook (FB) and Zynga (ZNGA). Given the overwhelming attention that both companies have received in the press in the last few months, this is to be expected. I have found in my investing experience buying richly hyped IPOs are a good way to go broke and I was a skeptic on Facebook's IPO from the start. However, if one stays away from the high profile IPOs, there are some bargains to be had. One company, EPAM Systems (EPAM), went public in February and just released second quarter earnings. Growth investors should take a good look at this fast growing company as it offers solid growth prospects, a great balance sheet and compelling valuations.
Key earnings highlights for EPAM Systems:
- Adjusted earnings per share came in at 37 cents a share, easily beating estimates of 31 cents a share.
- Revenues also beat estimates by $2mm and came in at $103.8mm.
- The company provided third quarter guidance of 34 to 36 cents a share on revenues of $107mm to $109mm, higher than previous analysts' estimates.
Four additional reasons EPAM is a solid growth play at under $16 a share:
- The 4 analysts that cover the stock have a median price target of $23 on EPAM, some 50% higher than the current stock price. Price targets range from $21.60 to $27 a share.
- The company has a solid balance sheet with over $100mm in net cash on the books (over 15% of market capitalization)
- Revenues are expected to grow at least 25% in FY2012 and over 20% in FY2013. The stock has a low five year projected PEG (.51) as well.
- The stock is cheap at just over 10 times forward earnings given its projected growth rate and cash on the books.
Disclosure: I am long EPAM.