Intersections Inc (NASDAQ:INTX), a USD$53.00M small-cap, operates in the commercial services industry, which generally follows the ups and downs of the economic cycle, as its services cater to various industries across different sectors. Commercial services analysts are forecasting for the entire industry, a relatively muted growth of 9.84% in the upcoming year . Today, I will analyse the industry outlook, as well as evaluate whether INTX is lagging or leading in the industry. See our latest analysis for INTX
What’s the catalyst for INTX’s sector growth?
A main driver of the industry has been the growing relevance of e-commerce for commercial services, enabling companies to reduce cost to serve while growing market presence at the same time. More than ever, it is crucial for the incumbents to position itself to respond to the growing relevance of stock-less independent dealers, further service pure e-commerce players and also build on their own e-commerce capabilities. In the previous year, the industry saw growth of 8.49%, though still underperforming the wider US stock market. INTX lags the pack with its sustained negative earnings over the past couple of years. The company’s outlook seems uncertain, with a lack of analyst coverage, which doesn’t boost our confidence in the stock. This lack of growth and transparency means INTX may be trading cheaper than its peers.
Is INTX and the sector relatively cheap?
Commercial services companies are typically trading at a PE of 19x, in-line with the US stock market PE of 19x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. However, the industry returned a higher 13.12% compared to the market’s 10.43%, potentially illustrative of past tailwinds. Since INTX’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge INTX’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? INTX has been a commercial services industry laggard in the past year. If your initial investment thesis is around the growth prospects of INTX, there are other commercial services companies that have delivered higher growth, and perhaps trading at a discount to the industry average. Consider how INTX fits into your wider portfolio and the opportunity cost of holding onto the stock.
Are you a potential investor? If INTX has been on your watchlist for a while, now may be a good time to dig deeper into the stock. Although its growth has delivered lower growth relative to its commercial services peers in the near term, the market may be pessimistic on the stock, leading to a potential undervaluation. Before you make a decision on the stock, I suggest you look at INTX’s future cash flows in order to assess whether the stock is trading at a reasonable price.
For a deeper dive into Intersections’s stock, take a look at the company’s latest free analysis report to find out more on its financial health and other fundamentals. Interested in other service stocks instead? Use our free playform to see my list of over 100 other service companies trading on the market.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.