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Here's Why You Should Retain IHS Markit (INFO) Stock Now
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A prudent investment decision involves buying stocks that have solid prospects and selling those that carry risks. At times, it is rational to hold certain stocks that have enough potential but bear the brunt of tough market conditions.
We believe that IHS Markit Ltd. with a long-term earnings per share growth rate of 12% and a market cap of $28.1 billion, seems to be a stock that investors should retain in their portfolio for now. For fiscal 2020 and 2021, the bottom line is expected to grow 4.9% and 12%, respectively.
In the past year, the stock has surged 18.6% compared with 16.6% rise of the industry it belongs to.
Aiding Factors
Well diversified global customer base and strong brand recognition is aiding IHS Markit. The company intends to continue innovating and developing new product offerings, and investment priorities primarily in automotive, energy and financial services. IHS Markit’s business model ensures solid recurring revenue generation capacity, which enables the company to deliver stable revenues and predictable cash flows. In the first quarter, company’s recurring revenues increased 5.3% on a year-over-year basis.
Furthermore, IHS Markit’s operational efficiency and financial discipline contributes to margin expansion. The company’s adjusted EBITDA margin expanded 90 basis points (bps) to 39.9% in the first quarter on a year-over-year basis.
Acquisition is a key growth strategy for IHS Markit. In May, the company acquired Catena Technologies — a global regulatory trade reporting firm based in Singapore for an undisclosed term — to provide comprehensive solutions that enable customers to fulfill their global regulatory compliance needs. To combat the current global health crisis, the company has developed a virtual Business Development Center (BDC) program to support its dealer partners during the coronavirus pandemic.
Risks Associated
IHS Markit has a debt-laden balance sheet. Total debt at the end of first-quarter fiscal 2020 was $5.21 billion, up from $5.13 billion at the end of the prior quarter. The debt-to-capital ratio of 0.38 is higher than the previous quarter’s 0.37. An increase in debt to capitalization ratio indicates higher risk of insolvency in challenging times.
Further, the company’s cash and cash equivalent of $144 million at the end of the first quarter was well below this debt level, underscoring that the company doesn’t have enough cash to meet this debt burden. Also, the cash level can’t meet the short-term debt of $251 million.
Zacks Rank and Stocks to Consider
IHS Markit currently carries a Zacks Rank #3 (Hold).
Long-term earnings (three to five years) growth rate for Elastic, SailPoint Technologies and DocuSign is estimated at 25.9%, 15% and 31.2%, respectively.
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Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.1% per year.
These 7 were selected because of their superior potential for immediate breakout.
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Here's Why You Should Retain IHS Markit (INFO) Stock Now
A prudent investment decision involves buying stocks that have solid prospects and selling those that carry risks. At times, it is rational to hold certain stocks that have enough potential but bear the brunt of tough market conditions.
We believe that IHS Markit Ltd. with a long-term earnings per share growth rate of 12% and a market cap of $28.1 billion, seems to be a stock that investors should retain in their portfolio for now. For fiscal 2020 and 2021, the bottom line is expected to grow 4.9% and 12%, respectively.
In the past year, the stock has surged 18.6% compared with 16.6% rise of the industry it belongs to.
Aiding Factors
Well diversified global customer base and strong brand recognition is aiding IHS Markit. The company intends to continue innovating and developing new product offerings, and investment priorities primarily in automotive, energy and financial services. IHS Markit’s business model ensures solid recurring revenue generation capacity, which enables the company to deliver stable revenues and predictable cash flows. In the first quarter, company’s recurring revenues increased 5.3% on a year-over-year basis.
IHS Markit Ltd. Revenue (TTM)
IHS Markit Ltd. revenue-ttm | IHS Markit Ltd. Quote
Furthermore, IHS Markit’s operational efficiency and financial discipline contributes to margin expansion. The company’s adjusted EBITDA margin expanded 90 basis points (bps) to 39.9% in the first quarter on a year-over-year basis.
Acquisition is a key growth strategy for IHS Markit. In May, the company acquired Catena Technologies — a global regulatory trade reporting firm based in Singapore for an undisclosed term — to provide comprehensive solutions that enable customers to fulfill their global regulatory compliance needs. To combat the current global health crisis, the company has developed a virtual Business Development Center (BDC) program to support its dealer partners during the coronavirus pandemic.
Risks Associated
IHS Markit has a debt-laden balance sheet. Total debt at the end of first-quarter fiscal 2020 was $5.21 billion, up from $5.13 billion at the end of the prior quarter. The debt-to-capital ratio of 0.38 is higher than the previous quarter’s 0.37. An increase in debt to capitalization ratio indicates higher risk of insolvency in challenging times.
Further, the company’s cash and cash equivalent of $144 million at the end of the first quarter was well below this debt level, underscoring that the company doesn’t have enough cash to meet this debt burden. Also, the cash level can’t meet the short-term debt of $251 million.
Zacks Rank and Stocks to Consider
IHS Markit currently carries a Zacks Rank #3 (Hold).
A few better-ranked stocks in the broader Zacks Business Services sector are Elastic N.V. (ESTC - Free Report) , SailPoint Technologies Holdings, Inc. and DocuSign, Inc. (DOCU - Free Report) . All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Long-term earnings (three to five years) growth rate for Elastic, SailPoint Technologies and DocuSign is estimated at 25.9%, 15% and 31.2%, respectively.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.1% per year.
These 7 were selected because of their superior potential for immediate breakout.
See these time-sensitive tickers now >>