Continued traction in the engineering services segment and growing demand from Europe augur well for Geometric, a Mumbai-headquartered engineering solutions provider. 

Geometric offers product lifecycle management, engineering solutions and offshore product development solutions and technologies. Also, Intellectual Property contributes a small portion to the company's overall revenues. 

Over the past five years, Geometric has posted a compounded annual growth rate ( CAGR) of 23% in its top line and 17% in bottom line. For the first half of FY12, revenue grew 27% YoY to Rs 364 crore. Operating profit margin improved 140 basis points to 12.3%. 

However, higher sales and improved operating efficiencies were offset by a higher amount of taxoutgo, which resulted in a marginal increase of 3% in net profit to Rs 25 crore. Effective tax rate during the period stood at 39% against 1% during the year-ago period. 

For the full year of FY12, Geometric expects to clock a revenue growth of 22-25%. It has taken up cost management measures which should help in maintaining margins at the current level. However, higher tax rate is likely to put pressure on the company's bottom line for the fiscal. 

The management expects the tax rate of 27% for the whole of the financial year. 

On the hedging front, with a reasonable amount of forward cover at 48 plus level, Geometric did benefit from the recent rupee depreciation. However, the company continues to see currency volatility as a concern because of the amount of uncertainty it introduces in decision making. 

Increased penetration of the existing clients by gaining larger share of their wallets and acquiring newer customers in Europe continue to be the key growth drivers. Also, the engineering sector has a huge scope of outsourcing. With its continued investments in engineering models, the company expects to gain from the opportunity. 

At the current market price of Rs 47, the stock trades at five times its earnings for the trailing 12 months. This is cheaper in comparison with the similar-sized industry rivals which are trading at a price-to-earnings ratio in the range of 6-8. Geometric's stock has fallen over 40% in the past one year against a 25% drop in the benchmark Sensex