IHS Markit (INFO) Last Update 4/12/21
% of Stock Price
Revenue
Gross Profits
Free Cash Flow
IHS Markit
STOCK PRICE
DIVISION
% of STOCK PRICE
Transportation
25.6%
$28.15
Net Debt
11.3% $12.43
TOTAL
100%
$109.73
$97.30
Yours
Trefis Price
N/A
$108
Market
 
Top Drivers for Period
Key Drivers
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TREFIS Analysis


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RECENT NEWS AND ANALYSIS

Potential upside & downside to trefis price

IHS Markit Company

VALUATION HIGHLIGHTS

  1. Financial Services constitute 58% of the Trefis price estimate for IHS Markit's stock.
  2. Transportation constitutes 26% of the Trefis price estimate for IHS Markit's stock.
  3. Energy & Chemicals constitute 13% of the Trefis price estimate for IHS Markit's stock.

WHAT HAS CHANGED?

  1. Acqusition By S&P Global

In November 2020, S&P Global announced that it would acquire IHS Markit in a $44 billion all-stock deal that would combine two of the largest financial data providers. The transaction is expected to close in the second half of 2021, subject to regulatory approval. The market for financial information has expanded quickly, driven by more complex products and algorithm-driven strategies that have increased demand for data. S&P likely sees value in IHS's fast-growing financial segment, which specializes in pricing and reference data for various asset classes, valuation services, and financial indices.

  1. Latest Earnings- Q1'21

IHS Markit delivered a steady performance for its fiscal first quarter (ending February 2021). While Revenue grew by about 3.6% year-over-year, primarily due to continued growth in the financial services segment this was partially offset by weakness in the resources segment. Adjusted EPS for the quarter grew to about $0.71, up from about $0.66 a year ago. FY'21 guidance remained unchanged, with the company projecting Revenue of between $4,535 million to $4,635 million, and adjusted EPS of between $3.11 to $3.16.

BUSINESS SUMMARY

IHS Markit is an information services company that provides information, research, analytics, and technology to customers in major industries, financial markets, and governments. The company was formed in 2016 via the merger of Information Handling Services (IHS), best known for its commodity, transportation, and energy sector analysis, and Markit, a financial data provider. The company is headquartered in London, United Kingdom.

IHS Markit's core competency lies in its ability to use its expertise to source and transform data into information and analytics that its customers use for their operational and strategic decisions. This model is based on the company’s fiscal year that ends November 30th.

SOURCES OF VALUE

We believe the Financial Services segment is more valuable than the other segments for three primary reasons:

1) Its higher revenue base (about $1.7 billion in FY'19, accounting for about 40% of the company's total revenue)

2) Stronger EBITDA margins of around 45% versus the company average of just over 40%.

3) Higher projected revenue growth rates compared to the company average.

KEY TRENDS

Recurring revenue

The company primarily offers its products and services via recurring fixed and variable fee agreements, enabling it to deliver stable revenues and predictable cash flows. During FY’19, the company garnered roughly 85% of its revenues from recurring revenue streams. Many of the company's offerings are core to customer's business operations, and a lot of the company's data sets are unique and difficult to replicate, meaning that switching costs are high for customers.

Acquisitions

The company has been steadily making niche acquisitions, as it looks to serve the needs of its existing customers better while attracting new customers. In 2018, the company acquired Ipreo, a leading financial services solutions, and data provider, for about $1.8 billion, as well as DeriveXperts, a provider of valuation services. Over 2019, while the company's organic revenue growth stood at 6%, acquisitive growth also came in at about 6%. These acquisitions not only bring in unique intellectual property and offerings but also broaden IHS Markit's base of customers.

Increasing focus on cross-selling

The company has been focusing on improving its geographic and customer penetration to drive revenues, adding new customers while increasing the use of its products and services by existing customers. The company is also leveraging its existing sales channels and its wide global footprint to add new customers. The company could have a lot of incentive for cross-selling products, as its business is largely a fixed-cost operation, with significant economies of scale, enabling it to bolster margins as revenues rise. Between FY'16 and FY'19, Adjusted EBITDA margins rose by about 400 bps to 40%.

Financial services growth

The company's financial services business has been accounting for an increasing mix of its total revenues. While the business accounted for about 34% of revenues in 2017, post the merger with Markit, we expect it to account for over 41% of revenue by the end of our review period. Some trends that could drive growth include rising financial regulation and compliance-related requirements and the increasing complexity of the financial services business and financial products.