3 Business Information Stocks to Watch Amid Industry Woes
The increased adoption and success of the work-from-home trend are enabling the Zacks Business – Information Services industry to address the rising demand for services that ensure risk mitigation, cost reduction and productivity improvement. The heightening technology adoption is benefiting companies like S&P Global Inc. SPGI, Verisk Analytics, Inc. VRSK, and Dun & Bradstreet Holdings, Inc. DNB, supporting them to offer digitally-transformed, personalized and value-added services.
About the Industry
The Zacks Business – Information Services industry comprises companies that offer a range of services, including software, data, risks, research, information and analytics solutions. These companies operate in a dynamic business environment characterized by evolving customer behavior, preferences and demographics. The key focus within the industry is currently on channeling money and efforts toward more effective operational components, such as technology, digital transformation and data-driven decision-making, to identify demand sources and target end markets. Prominent players include ratings, benchmarks, analytics, data provider S&P Global and the provider of data analytics solutions, Verisk Analytics.
3 Trends Shaping the Future of the Information Industry
Healthy Demand Environment: The industry is mature and has witnessed a progressively growing business environment in the past few years. Revenues, income and free cash flows are likely to see healthy growth during the post-pandemic economic improvement.
Demand for Customer-Centric Solutions: The pandemic has stoked a many-fold increase in demand for specific solutions that ensure risk mitigation, cost reduction and productivity improvement. These, in turn, have opened up more business opportunities for industry players. These companies are now modifying their business strategies to offer more customer-centric solutions.
Increased Adoption of Technologies: Digital transformation, automation in assembling and the use of big data in enhancing business information will fuel the industry’s growth in the days to come. Companies are shifting from conventional data solutions to technical and domain-specific expertise, data analytics solutions, financial consultancy and operational consultancy services.
Zacks Industry Rank Indicates Dull Near-Term Prospects
The Business – Information Services industry is housed within the broader Zacks Business Services sector. It carries a Zacks Industry Rank #233, which places it in the bottom 7% of more than 250 Zacks industries.
The group’s Industry Rank, which is 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 outperform the bottom 50% by a factor of more than two to one.
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's Price Performance
Over the past year, the Zacks Business – Information Services industry has outperformed the Zacks Business Services sector but underperformed the S&P 500 composite.
The industry has risen 14.1% compared with the S&P 500 composite and the broader sector’s growth of 16.2% and 12%, respectively, in the said time frame.
One-Year Price Performance
Industry's Current Valuation
On the basis of the forward 12-month price-to-earnings (P/E), which is commonly used for valuing business information services stocks, the industry is currently trading at 27.78X compared with the S&P 500’s 19.36X and the sector’s 24.6X.
Over the past five years, the industry has traded as high as 27.53X and as low as 21.13X, with a median of 25.69X, as the charts below show.
Price to Forward 12 Months P/E Ratio
3 Business Information Service Stocks in Focus
We have presented three stocks that are well-positioned to grow in the near term.
Verisk Analytics: This provider of data analytics solutions to the insurance markets has a robust growth strategy that focuses on organic growth, product development and acquisitions. Verisk continues to invest in people, data sets, analytic solutions, technology and complementary businesses to keep itself updated with changing requirements in the markets it serves. The company is maintaining its focus on increasing solution penetration with customers, developing new proprietary databases and predictive analytics, and expanding into new customer sectors. We expect the company’s organic revenues to increase more than 9% in 2023.
The recent acquisition of Morning Data has improved and expanded Verisk’s solutions for straight-through processing and distribution to the underserved, coverholders, SME brokers, MGAs, captives and insurers.
Verisk currently carries a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for 2023 EPS has remained unchanged at $5.72 in the past 60 days. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price and Consensus: VRSK
S&P Global: The company provides ratings, benchmarks, analytics and data to the capital and commodity markets. Currently, successful operations from remote locations, along with productivity programs, have been benefiting its top line.
The recent acquisition of Market Scan Information Systems has strengthened the company’s mobility offering. Another acquisition, ChartIQ, has strengthened S&P Global Market Intelligence. We expect the company’s revenues to grow 11.3% in 2023.
S&P Global also carries a Zacks Rank #3. The Zacks Consensus Estimate for 2023 EPS has increased 0.6% to $12.57 in the past 60 days.
Price and Consensus: SPGI
Dun & Bradstreet: This business decisioning, data and analytics provider also carries a Zacks Rank #3. The company is currently benefiting from an increasing number of clients and partners. Its business remains in good shape across North America and Internationally. DNB’s revenues increased 5.8% year over year in the third quarter of 2023.
The Zacks Consensus Estimate for 2023 EPS has remained unchanged at 98 cents in the past 60 days.
Price and Consensus: DNB
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Dun & Bradstreet Holdings, Inc. (DNB) : Free Stock Analysis Report
Verisk Analytics, Inc. (VRSK) : Free Stock Analysis Report
S&P Global Inc. (SPGI) : Free Stock Analysis Report
