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The increased adoption and success of the work-from-home trend is enabling the Zacks Business – Information Services industry to address the pandemic-induced rising demand for services that ensure risk mitigation, cost reduction and productivity improvement.
The heightening technology adoption is benefiting companies like FactSet Research Systems Inc. FDS, Nielsen Holdings plc NLSN and Recruit Holdings Co., Ltd. RCRRF, helping them 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, preference and demographics. Amid the pandemic, the key focus within the industry is currently on channelizing money and efforts toward more effective operational components, such as technology, digital transformation and data-driven decision making, in order to identify demand sources and target end markets. Prominent players include information-measurement giant Nielsen; ratings, benchmarks and data provider, S&P Global (SPGI); and provider of data-analytics solutions, Verisk Analytics (VRSK).
4 Trends Shaping the Future of Information Industry
Healthy Demand Environment: The industry is mature and has witnessed a progressively growing business environment in the past few years. With the economy gradually recovering from the pandemic blues, revenues, income and cash flows are likely to see healthy growth.
Demand for Customer-Centric Solutions: The coronavirus pandemic has stoked a many-fold increase in demand for specific solutions that ensure risk mitigation, cost reduction and productivity improvement. This, in turn, has opened up more business opportunities for industry players. These companies are now modifying their business strategies to offer more customer-centric solutions.
Digital Transformation is the Key: Companies focused on digital transformation are positioned to recover quickly post the global health crisis. This is because digital transformation substantially enhances operational efficiency, facilitates the time to market, and boosts a firm’s ability to quickly and efficiently meet customer expectations.
Increased Adoption of Technologies: 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 Bleak Near-Term Prospects
The Business – Information Services industry is housed within the broader Zacks Business Services sector. It carries a Zacks Industry Rank #175, which places it in the bottom 30% of more than 250 Zacks industries.
The group’s Industry Rank, which is basically 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 outperforms 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 underperformed the S&P 500 composite but outperformed the Zacks Business Services sector.
While the industry has depreciated 16.1%, the S&P 500 composite declined 9.6% in the said time frame. The broader sector fell 55.2%.
One-Year Price Performance
Industry's Current Valuation
On the basis of the forward 12-month price-to-earnings (P/E) ratio, which is commonly used for valuing business information services stocks, the industry is currently trading at 23.13X compared with the S&P 500’s 16.7X and the sector’s 23.42.
Over the past five years, the industry has traded as high as 32.73X, as low as 19.64X and at the median of 25.35X, as the charts below show.
Price to Forward 12 Months P/E Ratio
3 Business Information Service Stocks to Consider
We are presenting here three stocks that are well positioned to grow in the near term. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Recruit Holdings: This HR technology and business solutions provider is currently benefiting from top-line strength driven by increased hiring activity globally.
The company carries a Zacks Rank #1. The Zacks Consensus Estimate for the company’s fiscal 2023 earnings has improved 10.1% in the past 60 days. The stock fell 38.2% over the past year.
Price and Consensus: RCRRF
FactSet Research Systems: This integrated financial information and analytical applications provider has a business model and investment plan that make its operations more relevant to the challenging situations of today. The company is making investments in digital transformation, and personalized and value-added solutions. Its three-year plan is focused on technology transformation, data creation for private markets and the expansion of content for banking. These will help the company expand its client base and further strengthen its foothold in the market in the upcoming period.
The company currently carries a Zacks Rank of 3 (Hold). The Zacks Consensus Estimate for the ongoing-year EPS has been revised 3.2% upward in the last 60 days to $13.42. The stock has appreciated 12% over the past year.
Price and Consensus: FDS
Nielsen: The measurement giant has a dominant position in the U.S. television market. It is the leading and primary provider of audience measurement information and analytics for TV in the country. As new technologies enable video viewing online, both content providers and advertisers are looking for a known and trusted source to compare performance and reach. Since they have traditionally relied on Nielsen for TV, it positions the company very strongly to cater to this trend.
Nielsen currently carries a Zacks Rank #3 and the Zacks Consensus Estimate for its 2022 EPS has remained unchanged at $1.88 the past 60 days. The stock lost 4.1% over the past year.
Price and Consensus: NLSN
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FactSet Research Systems Inc. (FDS) : Free Stock Analysis Report
Nielsen Holdings Plc (NLSN) : Free Stock Analysis Report
Recruit Holdings Co., Ltd. (RCRRF) : Free Stock Analysis Report
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