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Business Information Services Gloomy Under Coronavirus Cloud
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The companies grouped under the Business – Information Services category offer a range of services, including software, data, risks, research, information and analytics solutions.
Prominent industry players include information-measurement giant Nielsen , ratings, benchmarks, analytics, and data provider S&P Global (SPGI - Free Report) , critical information and analytics provider IHS Markit and provider of data-analytics solutions Verisk Analytics (VRSK - Free Report) . These companies operate in a dynamic business environment characterized by changing customer behavior, preference and demographics.
Here are the industry’s three major themes:
The industry is mature with revenues mostly driven by paid content, either through subscription or transaction (pay-per-view). Revenues, income and cash flows have increased in the past few years, enabling most industry players to pay out stable dividends.
However, with the coronavirus pandemic hitting the economy hard and slowing down manufacturing and non-manufacturing activities, demand for business information services is currently under a near- to mid-term pressure.
Companies that have either completed or progressed significantly with their digital transformation journeys are positioned to recover quickly post the pandemic. This is because digital transformation significantly improves operational efficiency, facilitates the time to market, and boosts a firm’s ability to quickly and efficiently meet customer expectations.
Zacks Industry Rank Indicates Dull Prospects
The Business – Information Services industry is housed within the broader Zacks Business Services sector. It carries a Zacks Industry Rank #135, which places it in the bottom 47% 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 underperformance in the near term. 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.
The sell-side analysts covering the companies in this industry have been steadily lowering their estimates. Over the past year, the industry’s consensus earnings estimate for 2020 moved 6.9% south.
Despite the gloomy prospects, we present a few stocks that you may want to consider for your portfolio. But before that it’s worth taking a look at the industry’s performance and current valuation.
Industry Outperforms Sector and the S&P 500
Over the past year, the Zacks Business – Information Services industry has outperformed the S&P 500 composite and the broader sector.
While the industry has gained 16.3%, the S&P 500 composite has rallied 0.5%. Meanwhile, the broader sector has declined 6.7%.
One-Year Price Performance
Industry’s Current Valuation
On the basis of 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 27.46 compared with the S&P 500’s 20.8 and the sector’s 26.97.
Over the past five years, the industry has traded as high as 27.46X, as low as 19.42X and at the median of 22.19X, as the charts below show.
Forward 12-month Price-to-Earnings (P/E)
Bottom Line
While the coronavirus-induced slowdown in manufacturing and non-manufacturing activities has, undoubtedly, marred the industry, the digitization and adoption of technologies has become essential in helping it recover from the damage.
Nevertheless, we believe investors should retain S&P Global, IHS Markit, Verisk Analytics and Black Knight , FactSet Research Systems (FDS - Free Report) , TransUnion (TRU - Free Report) in their portfolios as these stocks currently carry a Zacks Rank #3 (Hold).
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
Image: Bigstock
Business Information Services Gloomy Under Coronavirus Cloud
The companies grouped under the Business – Information Services category offer a range of services, including software, data, risks, research, information and analytics solutions.
Prominent industry players include information-measurement giant Nielsen , ratings, benchmarks, analytics, and data provider S&P Global (SPGI - Free Report) , critical information and analytics provider IHS Markit and provider of data-analytics solutions Verisk Analytics (VRSK - Free Report) . These companies operate in a dynamic business environment characterized by changing customer behavior, preference and demographics.
Here are the industry’s three major themes:
Zacks Industry Rank Indicates Dull Prospects
The Business – Information Services industry is housed within the broader Zacks Business Services sector. It carries a Zacks Industry Rank #135, which places it in the bottom 47% 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 underperformance in the near term. 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.
The sell-side analysts covering the companies in this industry have been steadily lowering their estimates. Over the past year, the industry’s consensus earnings estimate for 2020 moved 6.9% south.
Despite the gloomy prospects, we present a few stocks that you may want to consider for your portfolio. But before that it’s worth taking a look at the industry’s performance and current valuation.
Industry Outperforms Sector and the S&P 500
Over the past year, the Zacks Business – Information Services industry has outperformed the S&P 500 composite and the broader sector.
While the industry has gained 16.3%, the S&P 500 composite has rallied 0.5%. Meanwhile, the broader sector has declined 6.7%.
One-Year Price Performance
Industry’s Current Valuation
On the basis of 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 27.46 compared with the S&P 500’s 20.8 and the sector’s 26.97.
Over the past five years, the industry has traded as high as 27.46X, as low as 19.42X and at the median of 22.19X, as the charts below show.
Forward 12-month Price-to-Earnings (P/E)
Bottom Line
While the coronavirus-induced slowdown in manufacturing and non-manufacturing activities has, undoubtedly, marred the industry, the digitization and adoption of technologies has become essential in helping it recover from the damage.
None of the stocks in our business information services universe currently carry a Zacks Rank #1 (Strong Buy) or a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Nevertheless, we believe investors should retain S&P Global, IHS Markit, Verisk Analytics and Black Knight , FactSet Research Systems (FDS - Free Report) , TransUnion (TRU - Free Report) in their portfolios as these stocks currently carry a Zacks Rank #3 (Hold).
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
See their latest picks free >>