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Business Information Services' Near-Term Outlook Dismal
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The Zacks Business – Information Services industry comprises companies that offer a range of services including software, data, risks, research, information and analytics solutions. The 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 and cash flows growing steadily over the past few years. This enabled most industry players to pay out stable dividends. Technavio expects global business information market to witness CAGR of more than 5% during the period 2019-2023.
Increasing demand for solutions that ensure cost reduction, productivity improvement and revenue growth has increased business opportunities for industry players. They are modifying their business strategies to offer more customer-centric solutions.
Automation in assembling and use of big data in enhancing business information should drive the industry’s growth. The companies are moving from conventional data solutions to technical and domain-specific expertise, data analytics solutions, financial consultancy, and operational consultancy services.
Zacks Industry Rank Indicates Gloomy Prospects
The Zacks Business – Information Services industry is housed within the broader Zacks Business Services sector. It carries a Zacks Industry Rank #192, which places it in the bottom 25% of more than 250 Zacks industries.
The group’s Zacks 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 decreasing their estimates. Over the past year, the industry’s consensus earnings estimate for the current year has decreased 11.7%.
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 S&P 500, Underperforms Sector
The Zacks Business – Information Services industry has outpaced the Zacks S&P 500 composite but lagged the broader Zacks Business Services sector over the past year.
The industry has rallied 15.4% over this period compared with the broader sector’s rise of 17.2%. The S&P 500 composite has gained 10.8% in the said time frame.
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 25.23 compared with the S&P 500’s 17.33 and the sector’s 23.36.
Over the past five years, the industry has traded as high as 25.23X, as low as 19.42X and at the median of 21.53X, as the charts below show.
Forward 12-month Price-to-Earnings (P/E)
Bottom Line
Although near-term prospects look gloomy, the business information market should gain traction with service providers increasing customer-centric offerings to meet varied demands. The shift toward technical and domain-specific expertise, financial consultancy, and operational consultancy services are expected to boost growth.
Two of the stocks in the Zacks Business – Information Services space currently holda Zacks Rank #2 (Buy). We have mentioned two more stocks from the industry, which we believe investors should retain in their portfolio, as they carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
TransUnion (TRU - Free Report) : The stock of this Chicago-based risk and information solutions provider carries a ZacksRank #2. The Zacks Consensus Estimate for current year EPS has increased 0.8% to $2.48 in the past 60 days.
Price and Consensus: TRU
Sigma Labs, Inc. : The stock of this New Mexico-based developer of manufacturing and materials technologies also carries a Zacks Rank #2. The Zacks Consensus Estimate for current year EPS has remained unchanged at a loss of 50 centsoverthe past 60 days.
Price and Consensus: SGLB
FactSet Research Systems Inc. (FDS - Free Report) : The stock of this Connecticut-based provider of critical information, analytics, and solutions carries a Zacks Rank #3. The Zacks Consensus Estimate for current year EPS has increased 1.1% in the past 60 days.
Price and Consensus: FDS
IHS Markit Ltd. : The stock of this London-based provider of specialty industrial services also carries a Zacks Rank #3. The Zacks Consensus Estimate for current year EPS has remained unchanged at $2.25 in the past 60 days.
Price and Consensus: INFO
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This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.
Image: Bigstock
Business Information Services' Near-Term Outlook Dismal
The Zacks Business – Information Services industry comprises companies that offer a range of services including software, data, risks, research, information and analytics solutions. The 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 Gloomy Prospects
The Zacks Business – Information Services industry is housed within the broader Zacks Business Services sector. It carries a Zacks Industry Rank #192, which places it in the bottom 25% of more than 250 Zacks industries.
The group’s Zacks 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 decreasing their estimates. Over the past year, the industry’s consensus earnings estimate for the current year has decreased 11.7%.
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 S&P 500, Underperforms Sector
The Zacks Business – Information Services industry has outpaced the Zacks S&P 500 composite but lagged the broader Zacks Business Services sector over the past year.
The industry has rallied 15.4% over this period compared with the broader sector’s rise of 17.2%. The S&P 500 composite has gained 10.8% in the said time frame.
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 25.23 compared with the S&P 500’s 17.33 and the sector’s 23.36.
Over the past five years, the industry has traded as high as 25.23X, as low as 19.42X and at the median of 21.53X, as the charts below show.
Forward 12-month Price-to-Earnings (P/E)
Bottom Line
Although near-term prospects look gloomy, the business information market should gain traction with service providers increasing customer-centric offerings to meet varied demands. The shift toward technical and domain-specific expertise, financial consultancy, and operational consultancy services are expected to boost growth.
Two of the stocks in the Zacks Business – Information Services space currently holda Zacks Rank #2 (Buy). We have mentioned two more stocks from the industry, which we believe investors should retain in their portfolio, as they carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
TransUnion (TRU - Free Report) : The stock of this Chicago-based risk and information solutions provider carries a ZacksRank #2. The Zacks Consensus Estimate for current year EPS has increased 0.8% to $2.48 in the past 60 days.
Price and Consensus: TRU
Sigma Labs, Inc. : The stock of this New Mexico-based developer of manufacturing and materials technologies also carries a Zacks Rank #2. The Zacks Consensus Estimate for current year EPS has remained unchanged at a loss of 50 centsoverthe past 60 days.
Price and Consensus: SGLB
FactSet Research Systems Inc. (FDS - Free Report) : The stock of this Connecticut-based provider of critical information, analytics, and solutions carries a Zacks Rank #3. The Zacks Consensus Estimate for current year EPS has increased 1.1% in the past 60 days.
Price and Consensus: FDS
IHS Markit Ltd. : The stock of this London-based provider of specialty industrial services also carries a Zacks Rank #3. The Zacks Consensus Estimate for current year EPS has remained unchanged at $2.25 in the past 60 days.
Price and Consensus: INFO
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.
This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.
See their latest picks free >>