The most successful investors, businesses, and entrepreneurs would be ineffective without accurate, informative data and facts — reliable information, suggests Stephen Mauzy, growth stock expert and editor of Personal Wealth Advisor.
We all covet our reliable sources of data and facts. We willingly pay to maintain the relationship. Investors, businesses, and entrepreneurs are no different. Once we all find a reliable source, we stick with it.
Few companies have as high a reputation as a provider of useful data and facts than IHS Markit (INFO). Its business is to deliver data, insight, and software to its ever-expanding customer base.
Its analytics reveal inter-dependencies across complex industries, which reduces risk and improves operational efficiency for its many customers.
As for the customers, they’re mostly commercial and institutional, but you might be familiar with at least one of its information services. IHS Markit is the company behind the popular CARFAX vehicle reports.
Once you have established a reputation as the go-to data source, growth is sure to come. IHS Markit has continually grown. Revenue over the past nine years has grown at a 17.3% average annual rate.
Annual revenue of $1.1 billion in fiscal-year 2010 grew to $4.4 billion for fiscal-year 2019. Net income over the same period grew to $503 million from $138 million. That’s a 16.6% annual growth rate.
As for the customers who generate the revenue and earnings, the base is well-diversified. IHS Markit has over 50,000 business and government customers. The base includes 80% of the Fortune Global 500 and more than 80% of the Fortune U.S. 1,000.
The business is as sticky as flypaper. Once IHS Markit lands a customer, few leave. Roughly 85% of the revenue is recurring. Because much of the revenue stream is “captured,” customer acquisition costs are low. Margins, in turn, are high.
Of course, 2020 is the pandemic year, where everything will be marked with an asterisk. Growth in some areas was locked down with many sectors of the world economy.
Management expects fiscal-year 2020 (which ends in November) revenue of $4.3 billion, down roughly 2% compared to fiscal-year 2019. EPS should be up roughly 10% year over year. Growth in the current environment underscores the quality of the business model.
My 12-month price target is $95. I based it on the historical trailing 29 P/E) multiple applied to fiscal-year 2021 EPS estimates. We’re looking at 22% upside potential for the next year. I can argue that my outlook is conservative given IHS Markit’s propensity for upside surprises. Buy up to $83.
