Genpact (G) is a legitimate offspring of giant conglomerate General Electric (GE), which spun it off in 2005. It is still a tiny enterprise, but it’s been winging up. It has become strong enough that its young stock has outperformed that of the super conglomerate so far this year.

 

Several analysts believe Genpact is just starting to build up and is on its way to greater heights. "Genpact is attractively priced relative to the company’s future growth prospects," says Joseph D. Foresi, analyst at Janney Capital Markets, who rates the stock a buy.

 

He notes that Genpact's global clients, which generate 71.3% of revenues, grew 54.1%, while at GE global clients, which account for 28.7%, grew at just 0.4% year-over-year. And Genpact's stock has gone up to $15.35 a share on Dec. 6, 2011, up from its 52-week low of $13.77 in February 2011. GE, on the other hand, closed at $16.72 on Dec. 6, 2011, down from $21 in February 2011. And Genpact's market capitalization of $3.4 billion is miniscule, when compared with GE’s jaw-dropping $150.7 billion.

 

Nonetheless, Genpact is a "solid long-term" investment idea, given its market leadership in a strong secular growth industry, and in spite of the "choppiness" in the macro-economic environment, argues David J. Koning, analyst at investment firm Robert W. Baird.

 

Its current valuation is reasonable, adds Koning, who has a price target on Genpact shares of $21. And if everything goes well according to Genpact's growth plans, he sees $25 a share as a "reasonable upside" target, based on 20 times estimated 2013 earnings of $1.25 a share. For 2012, he forecasts $1.02 earnings per share, up from an estimated $90 cents a share in 2011 and 2010’s actual earnings of 74 cents.

 

Genpact is a provider of business-process outsourcing and IT services to global companies in the banking, financial services, insurance and manufacturing industries. It reorganized itself as an independent company, Genpact Ltd., in 2007, and then went public later in the year.

 

During Genpact's initial public offering in 2007 and the subsequent second stock offering in March of 2010, GE slashed its total stake in the company from 40% to 9%. But the ex-parent still accounts for a third of Genpact's revenue, or about $480 million. In 2010, Genpact's revenues totaled $1.25 billion. They are expected to climb to $1.58 billion in 2011, and then jump to an estimated $1.86 billion in 2012.  

 

GE isn’t the only big name in Genpact's list of clients. Among the other blue-chip customers are Pfizer (PFE), Morgan Stanley (MS), Wells Fargo (WFC), and Japanese-automaker, Nissan (NSANY). Operating in 17 countries, Genpact serves primarily the large corporations in the U.S., Europe, and Asia, and executes more than 3,000 processes from its 41 delivery centers in such countries as China, Spain, the Netherlands, South Africa, and the U.S.

 

Managing business processes efficiently has become an important tool for corporations to better execute plans for growth, including analyzing and helping execute innovation, automation, and sophisticated cost-cutting programs, says Tiger Tyagarajan, President and CEO of Genpact. He headed Genpact when it was still part of GE, before getting promoted to lead GE Capital’s consumer lending business unit.

 

He recalls that when Genpact went public, it was growing at a rate of 70%. The IPO price was $14, raising some $2.6 billion in the process. In managing its clients' business processes, Genpact gets to have a hand in almost every aspect of their businesses, including analyzing loans and credit, updating a company’s products, and looking over contracts. The latter serves to insure, for example, that parts are available throughout a certain period of time so that companies like Penske Transport are able to sustain operations without any hitch because of, say, lack of spare parts, says Tyagarajan.

 

"It's important to provide accurate data analysis for efficiency and smart corporate decisions," Tyagarajan adds. In the end, he says, managing business processes is all about "making sure that everything runs smoothly – and better."

Gene Marcial wrote the Inside Wall Street column for Business Week for 28 years and now writes the column for MSN.com. He also wrote the book, Seven Commandments of Stock Investing, published by FT Press.