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3 Top Stocks From the Booming Business Information Industry
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The increased adoption and success of the work-from-home trend is enabling the Zacks Business – Information Services industry to address the pandemic-induced rising demand for services that ensure risk mitigation, cost reduction and productivity improvement.
The heightening technology adoption is benefiting companies like FactSet Research Systems Inc. (FDS - Free Report) , IHS Markit Ltd. and Black Knight, Inc. , supportingthem to offer digitally-transformed, personalized and value-added services.
About the Industry
The Zacks Business – Information Services industry comprises companies that offer a range of services, including software, data, risks, research, information and analytics solutions. These companies operate in a dynamic business environment characterized by evolving customer behavior, preference and demographics. Amid the pandemic, the key focus within the industry is currently on channelizing money and efforts toward more effective operational components, such as technology, digital transformation and data-driven decision making to identify demand sources and target end markets. Prominent players include information-measurement giant Nielsen (NLSN), ratings, benchmarks, analytics, and data provider S&P Global (SPGI), critical information and analytics provider IHS Markit and provider of data-analytics solutions Verisk Analytics (VRSK).
4 Trends Shaping the Future of Information Industry
Demand Environment Healthy: The industry is mature and has witnessed a progressively growing business environment in the past few years. With the economy gradually recovering from the pandemic blues, revenues, income and cash flows are likely to see healthy growth.
Emergency of Customer-centric Solutions: The coronavirus pandemic has stoked a many-fold increase in demand for specific solutions that ensure risk mitigation, cost reduction and productivity improvement. This, in turn, has opened up more business opportunities for industry players. These companies are now modifying their business strategies to offer more customer-centric solutions.
Digital Transformation is the Key: Companies that have either completed or progressed significantly with their digital transformation journeys are positioned to recover quickly post the global health crisis. This is because digital transformation substantially enhances operational efficiency, facilitates the time to market, and boosts a firm’s ability to quickly and efficiently meet customer expectations.
Increased Adoption of Technologies: Automation in assembling and the use of big data in enhancing business information will fuel the industry’s growth in the days to come. Companies are shifting from conventional data solutions to technical and domain-specific expertise, data analytics solutions, financial consultancy, and operational consultancy services.
Zacks Industry Rank Indicates Bright Near-Term Prospects
The Business – Information Services industry is housed within the broader Zacks Business Services sector. It carries a Zacks Industry Rank #22, which places it in the top 55% of more than 250 Zacks industries.
The group’s Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates solid near-term growth prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and current valuation.
Industry Outperforms Sector, Underperforms the S&P 500
Over the past year, the Zacks Business – Information Services industry has underperformed the S&P 500 composite but outperformed the broader sector.
While the industry has appreciated 24.3%, the S&P 500 composite rallied 32.2%, while the broader sector fell 12.6%.
One-Year Price Performance
Industry's Current Valuation
On the basis of the forward 12-month price-to-earnings (P/E) ratio, which is commonly used for valuing business information services stocks, the industry is currently trading at 31.49 compared with the S&P 500’s 21.34 and the sector’s 31.
Over the past five years, the industry has traded as high as 32.51X, as low as 19.64X and at the median of 24.22X, as the charts below show.
IHS Markit Ltd. : The company provides critical information, analytics, and solutions globally. Ithas a well-diversified global customer base and strong brand recognition. The depth and breadth of information and analytics is one of its key competitive differentiators. IHS Markit’s business model ensures solid recurring revenue generation capacity. Its products and services are offered primarily through recurring fixed and variable fee agreements, which realize stable revenues and cash flows.
IHS Markit carries a Zacks Rank #2, at present. The Zacks Consensus Estimate for the 2021 EPS has been revised 1% upward in 60 days’ time. The stock has rallied 53.7% over the past year.
Price and Consensus: INFO
FactSet Research Systems (FDS - Free Report) : This integrated financial information and analytical applications provider has a business model and investment plan that make its operations more relevant to the challenging situations of today. The company is making investments in digital transformation, and personalized and value-added solutions. Its three-year plan is focused on technology transformation, data creation for private markets and the expansion of content for banking. These will help the company expand the client base and further strengthen its foothold in the market in the upcoming period.
The company currently carries holds a Zacks Rank of 2. The Zacks Consensus Estimate for the ongoing-year EPS has been revised 3.7% upward in the last 60 days to $12.21. The stock has appreciated 26.9% over the past year.
Price and Consensus: FDS
Black Knight : This integrated software, data, and analytics solutions provider is benefiting from an expanding client base, strengthening client relationships through innovative solutions, strategic acquisitions and a robust digital footprint.
The company carries a Zacks Rank of 2, presently. The Zacks Consensus Estimate for the current-year earnings has remained unchanged at $2.26 in 60 days’ time.
Price and Consensus: BKI
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3 Top Stocks From the Booming Business Information Industry
The increased adoption and success of the work-from-home trend is enabling the Zacks Business – Information Services industry to address the pandemic-induced rising demand for services that ensure risk mitigation, cost reduction and productivity improvement.
The heightening technology adoption is benefiting companies like FactSet Research Systems Inc. (FDS - Free Report) , IHS Markit Ltd. and Black Knight, Inc. , supportingthem to offer digitally-transformed, personalized and value-added services.
About the Industry
The Zacks Business – Information Services industry comprises companies that offer a range of services, including software, data, risks, research, information and analytics solutions. These companies operate in a dynamic business environment characterized by evolving customer behavior, preference and demographics. Amid the pandemic, the key focus within the industry is currently on channelizing money and efforts toward more effective operational components, such as technology, digital transformation and data-driven decision making to identify demand sources and target end markets. Prominent players include information-measurement giant Nielsen (NLSN), ratings, benchmarks, analytics, and data provider S&P Global (SPGI), critical information and analytics provider IHS Markit and provider of data-analytics solutions Verisk Analytics (VRSK).
4 Trends Shaping the Future of Information Industry
Demand Environment Healthy: The industry is mature and has witnessed a progressively growing business environment in the past few years. With the economy gradually recovering from the pandemic blues, revenues, income and cash flows are likely to see healthy growth.
Emergency of Customer-centric Solutions: The coronavirus pandemic has stoked a many-fold increase in demand for specific solutions that ensure risk mitigation, cost reduction and productivity improvement. This, in turn, has opened up more business opportunities for industry players. These companies are now modifying their business strategies to offer more customer-centric solutions.
Digital Transformation is the Key: Companies that have either completed or progressed significantly with their digital transformation journeys are positioned to recover quickly post the global health crisis. This is because digital transformation substantially enhances operational efficiency, facilitates the time to market, and boosts a firm’s ability to quickly and efficiently meet customer expectations.
Increased Adoption of Technologies: Automation in assembling and the use of big data in enhancing business information will fuel the industry’s growth in the days to come. Companies are shifting from conventional data solutions to technical and domain-specific expertise, data analytics solutions, financial consultancy, and operational consultancy services.
Zacks Industry Rank Indicates Bright Near-Term Prospects
The Business – Information Services industry is housed within the broader Zacks Business Services sector. It carries a Zacks Industry Rank #22, which places it in the top 55% of more than 250 Zacks industries.
The group’s Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates solid near-term growth prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and current valuation.
Industry Outperforms Sector, Underperforms the S&P 500
Over the past year, the Zacks Business – Information Services industry has underperformed the S&P 500 composite but outperformed the broader sector.
While the industry has appreciated 24.3%, the S&P 500 composite rallied 32.2%, while the broader sector fell 12.6%.
One-Year Price Performance
Industry's Current Valuation
On the basis of the forward 12-month price-to-earnings (P/E) ratio, which is commonly used for valuing business information services stocks, the industry is currently trading at 31.49 compared with the S&P 500’s 21.34 and the sector’s 31.
Over the past five years, the industry has traded as high as 32.51X, as low as 19.64X and at the median of 24.22X, as the charts below show.
Price to Forward 12 Months P/E Ratio
3 Business Information Service Stocks to Consider
We are presenting three stocks that are well positioned to grow in the near term. You can see the complete list of today’s Zacks #1 Rank stocks here.
IHS Markit Ltd. : The company provides critical information, analytics, and solutions globally. Ithas a well-diversified global customer base and strong brand recognition. The depth and breadth of information and analytics is one of its key competitive differentiators. IHS Markit’s business model ensures solid recurring revenue generation capacity. Its products and services are offered primarily through recurring fixed and variable fee agreements, which realize stable revenues and cash flows.
IHS Markit carries a Zacks Rank #2, at present. The Zacks Consensus Estimate for the 2021 EPS has been revised 1% upward in 60 days’ time. The stock has rallied 53.7% over the past year.
Price and Consensus: INFO
FactSet Research Systems (FDS - Free Report) : This integrated financial information and analytical applications provider has a business model and investment plan that make its operations more relevant to the challenging situations of today. The company is making investments in digital transformation, and personalized and value-added solutions. Its three-year plan is focused on technology transformation, data creation for private markets and the expansion of content for banking. These will help the company expand the client base and further strengthen its foothold in the market in the upcoming period.
The company currently carries holds a Zacks Rank of 2. The Zacks Consensus Estimate for the ongoing-year EPS has been revised 3.7% upward in the last 60 days to $12.21. The stock has appreciated 26.9% over the past year.
Price and Consensus: FDS
Black Knight : This integrated software, data, and analytics solutions provider is benefiting from an expanding client base, strengthening client relationships through innovative solutions, strategic acquisitions and a robust digital footprint.
The company carries a Zacks Rank of 2, presently. The Zacks Consensus Estimate for the current-year earnings has remained unchanged at $2.26 in 60 days’ time.
Price and Consensus: BKI