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Ness Technologies, Inc. (NSTC) posted lower-than-expected Q3 results, hurt mainly by a slowdown at its U.S. financial services and NessPRO software distribution businesses.
Shares of Ness Technologies are currently trading at near their 52-week low price, representing a P/E ratio of 4.0x our 2009 EPS estimate of $1.20, a significant discount to the industry. Ness faces intense competition from large players in the IT industry as well as faces risk of exchange rate fluctuation.
The company posted weak fiscal 2008 third quarter results and provided conservative revenue guidance for 2009. We believe the company is facing slow growth, and the risk of execution remains. Moreover, the choppy equity markets and an uncertain global economy have led to a significant fall in its stock price. As a result of increased challenges, Ness will not be able to sustain improvements made in the first half of 2008.
We therefore downgrade the shares of NSTC to Sell with a six-month target price of $4.00, representing a P/E multiple of 3.3x our 2009 earnings estimate of $1.20 per share, a discount to its peer group.
Priyanka Poddar contributed to the report.
Read the full analyst report on NSTC
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