IT export is a market that is expected to grow massively in the coming years and this Top Pick is an opportunity for growth minded investors to benefit at a bargain price, explains Matthew Castel, money manager and editor of Logos LP Blog.

Syntel (SYNT) is a U.S.-based supplier of IT outsourcing for banking and insurance, healthcare, retail and manufacturing Global 2000 companies with a market cap of $1.63 billion.

The reason we are presented with such an excellent long-term opportunity is the fact that, in the latest quarter, earnings fell off a cliff.

This was due to increased overhead in a addition to a onetime tax of approx. $271 million net off foreign tax credits upon the repatriation of $1.24 billion of cash held by Syntel’s foreign subsidiaries.

The company is also dealing with several growth challenges extending deal cycles including: soft global macroeconomic trends, industry specific headwinds and regulatory related uncertainty in key end markets.

These are a concern, but we are dealing with a management group with a significant ownership stake in the company (which they have been increasing of late) and a track record of excellent execution.

Management is investing heavily in automation and capability building with a clear preference for long-term growth rather than quarterly outperformance. 

What is interesting about the name is that we believe the stock has been oversold.

Similar competitors in this space that are suffering from similar headwinds and currency issues are trading anywhere from 2.0-3.0x sales, whereas Syntel is trading at a paltry 1.7x sales.

We believe that the stock is worth at least $27, implying a 42% gain from current levels. Look for this name below $19.50 as an interesting entry point. 

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