Shares of IHS Markit Ltd. INFO have surged 31.4% in the past year, outperforming the 18.8% rally of the Zacks S&P 500 composite.
With expected long-term earnings per share growth rate of 12% and a market cap of $35.1 billion, IHS Markit seems is to be a stock that investors should retain in their portfolio for now.
What's Driving It?
IHS Markit is benefiting from a well- diversified global customer base and strong brand recognition. The company has a consultative product development approach, which means it works closely with its customers in introducing offerings and enhancing established ones. This, in turn, has helped it build strong customer relations over time. Currently, IHS Markit’s offerings are well established across multiple industries and geographies. The company intends to continue innovating and developing new product offerings, and with investment priorities primarily lying in automotive, energy and financial services.
Acquisition is a key growth strategy for IHS Markit. Over time, strategic acquisitions have proved conducive for the company by helping it to expand offerings and strengthen its international footprint. The buyout of Catena Technologies in May is expected to strengthen the quality and efficiency of the company’s trade reporting services. Likewise, the 2019 acquisition of Novation Analytics should enable the company to provide more holistic emissions modelling and simulation for automotive manufacturers and suppliers.
IHS Markit has a debt-laden balance sheet. Total debt at the end of second-quarter fiscal 2020 was $5.39 billion, up from $5.21 billion at the end of the prior quarter. The debt-to-capital ratio of 0.40 is higher than the previous quarter’s 0.38. An increase in debt- to- capitalization ratio indicates higher risk of insolvency in challenging times.
Further, the company’s cash and cash equivalent of $208 million at the end of the second 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 meet the short-term debt of $251 million.
Zacks Rank and Key Picks
Currently, IHS Markit has a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader Zacks Business Services sector are Republic Services RSG, IQVIA Holdings IQV and CoreLogic CLGX. All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The long-term expected earnings per share (three to five years) growth rate for Republic Services, IQVIA Holdings and CoreLogic is 6.6%, 9.9% and 12%, respectively.
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