IHS Markit Ltd. (INFO - Free Report) is currently benefiting from a strong business model that ensures stable revenues and cash flows.
Shares of the company have surged 11.8% in the past year compared with the 2.6% rise of the industry.
With an expected long-term earnings per share growth rate of 11.1% and a market cap of $20 billion, IHS Markit seems to be a stock that investors should retain in their portfolio for now.
Factors Driving IHS Markit’s Performance
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 ensures stable revenues and cash flows. This strong business model along with operational efficiency and financial discipline boosts margins. In the last reported quarter, adjusted EBITDA margin improved 20 basis points (bps) to 39% on a year-over-year basis. Also, IHS Markit’s business requires low capital requirement, which keeps cash in good shape.
IHS Markit Ltd. Revenue (TTM)
The company’s depth and breadth of information and analytics is a key competitive differentiator. Its global team of industry experts, research analysts and economists help create intellectual wealth across several industries and provide customers with high-quality strategic information and research.
An effective data transformation process is helping the company to consistently improve information and analytics offerings as well as create a solid global customer base. Many of these offerings are core to business operations of long-term customers.
Acquisitions of DeriveXperts and Ipreo this year are expected to expand the company’s financial services business.
Although IHS Markit is riding on growth prospects, it is not free from overhangs. The company experiences significant acquisition-related costs. Moreover, costs might escalate further as the company plans to make significant investments in automotive, energy and financial services. Nevertheless, we believe that solid recurring revenue generation capacity, strong global customer base and acquisitions bode well for the company.
Zacks Rank and Stocks to Consider
Currently, IHS Markit is a Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
A few better-ranked stocks in the Zacks Business Services sector are General Finance Corporation (GFN - Free Report) , Heidrick & Struggles International, Inc (HSII - Free Report) and WNS (Holdings) Limited (WNS - Free Report) , each sporting a Zacks Rank #1.
The long-term expected EPS (three to five years) growth rate for General Finance, Heidrick & Struggles and WNS is 11%, 13.5%, and 12.5%, respectively.
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