Cash Rich, Low Price – Gartner Stock to Break Out?
We think Gartner (IT) stock is worth a look: It is growing, producing cash, and available at a significant valuation discount. Companies like this can use cash to fuel additional revenue growth, or simply pay their shareholders through dividends or buybacks. Either move makes them attractive to the market.
What Is Happening With IT
IT stock is available at a significant discount to its 3-month, 1-year, and 2-year highs. This can be attributed to market anxiety over AI’s advisory impact, reduced government IT spending, a Q4 2025 revenue miss, and softened 2026 guidance.
The stock may not reflect it yet, but here is what’s going well: robust core research client retention (with AskGartner AI) and expected contract value acceleration. Free cash flow over $1.2 billion in 2025 fuels buybacks and the Digital Markets divestiture. Despite modest Q4 revenue, strong cash generation helps manage debt, providing good momentum in the expanding AI-driven IT market.
IT Has Strong Fundamentals
- Cash Yield: Gartner offers an impressive cash flow yield of 10.6%.
- Growing: Revenue growth of 3.7% over the last twelve months is not that great, but your cash pile is likely to grow.
- Valuation Discount: IT stock is currently trading at 40% below its 3-month high, 69% below its 1-year high, and 72% below its 2-year high.
Below is a quick comparison of IT fundamentals with S&P medians.
| IT | S&P Median | |
|---|---|---|
| Sector | Information Technology | – |
| Industry | IT Consulting & Other Services | – |
| Free Cash Flow Yield | 10.6% | 4.0% |
| Revenue Growth LTM | 3.7% | 6.5% |
| Operating Margin LTM | 18.1% | 18.8% |
| PS Ratio | 1.7 | 3.4 |
| PE Ratio | 15.2 | 25.1 |
| Discount vs 3-Month High | -39.6% | -4.1% |
| Discount vs 1-Year High | -69.4% | -7.3% |
| Discount vs 2-Year High | -72.1% | -9.9% |
*LTM: Last Twelve Months
But What About The Risk Involved?
While IT stock may be a compelling investment opportunity, it’s always helpful to be aware of a stock’s history of drawdown. Tech stocks took some serious hits in past crashes. During the Dot-Com Bubble, the drop was over 75%. The Global Financial Crisis saw a 70% plunge, and the Covid pandemic dragged prices down nearly 50%. Even the smaller shocks weren’t kind: the 2018 correction knocked about 26%, and the inflation shock sliced around 34%. Strong fundamentals matter, but when the market turns sour, big dips are hard to avoid. But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, and outlook changes. Read IT Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.
If you want to see more details, read Buy or Sell IT Stock.
Other Stocks Like IT
Not ready to act on IT? You could consider these alternatives:
We chose these stocks using the following criteria:
- Greater than $2 Bil in market cap
- Positive revenue growth
- High free cash flow yield
- Meaningful discount to 3M, 1Y, and 2Y highs
A portfolio that was built starting 12/31/2016 with stocks that fulfill the criteria above would have performed as follows:
- Average 6-month and 12-month forward returns of 25.7% and 57.9% respectively
- Win rate (percentage of picks returning positive) of >70% for both 6-month and 12-month periods
Institutional-Grade Models to Anchor High-Net-Worth Accounts
Concentration risk is the #1 threat to client retention during a downturn. Our ‘Core & Satellite’ framework allows you to keep your high-conviction ideas while anchoring the bulk of assets in a defensive, rules-based model.
In 2008, when the S&P 500 collapsed by >40%, our Boston-based wealth management partner’s core strategy stayed positive. That is the power of ‘Rules-Based Investing’. By integrating Trefis strategies with their defensive asset allocation, you give your clients a portfolio designed to survive the drawdowns.