Shares of IHS Markit Inc. (INFO - Free Report) scaled a new 52-week high of $79.96 in the trading session on Jan 13, before closing a tad lower at $79.93.
The company’s shares have charted a solid trajectory in recent times, appreciating 61% over the past year, ahead of the 44% growth of the industry it belongs to and 25.6% rally of the Zacks S&P 500 composite.
Notably, IHS Markit has witnessed a 21.2% rise in share price since it posted third-quarter fiscal 2019 results.
Let’s find out what’s supporting the uptick.
Consecutive Earnings Beat
IHS Markit reported better-than-expected earnings performance in the first three quarters of fiscal 2019. Notably, the company’s operational efficiency and financial discipline, which contribute to margin expansion, continued to boost its bottom line. Its adjusted EBITDA expanded 16% and adjusted EBITDA margin improved 130 basis points in the first nine months of fiscal 2019, on a year-over-year basis.
Solid Recurring Revenue Generation
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 allows the company to deliver stable revenues and cash flows. Its recurring revenues increased 12.1% in the third quarter and 12.6% in the first nine months of fiscal 2019, on a year-over-year basis.
Prudent Business Moves With Healthy Cash Flow
IHS Markit’s business requires low capital requirement, which in turn, boosts its cash generation capacity and allows it to pursue acquisition opportunities. Strategic acquisitions over time have helped the company to expand offerings and strengthen international footprint. It is also benefiting from highly-diversified global customer base and strong brand recognition.
The company’s free cash flow increased 8% year over year in the first nine months of fiscal 2019. Cash flow from operations improved 10% year over year during the same time period.
Zacks Rank & Stocks to Consider
Currently, IHS Markit carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader Zacks Business Services sector are ICF International (ICFI - Free Report) , Accenture (ACN - Free Report) and Booz Allen Hamilton (BAH - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Long-term expected EPS (three to five years) growth rate for ICF International, Accenture and Booz Allen Hamilton is 10%, 10.3% and 13%, respectively.
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