IHS Markit: A Quiet Juggernaut

Summary

• IHS Markit, a leading provider of data and information to corporations and governments, has become even more dominant in the space after its merger.
• In 2016, the company completed the merger of IHS and Markit, adding Markit's massive and profitable financial data platform to its portfolio of offerings.
• The company is also still achieving solid organic revenue growth, most of which is recurring revenue.
• The company's capital-light, high-margin business makes its earnings expansion potential huge.

IHS Markit (NASDAQ: INFO), the London-based global giant in information and analytics, looks to be a solid buy ahead of the Q1 earnings season. As a company with an extremely wide moat, loads of proprietary data and recurring revenues, this is the kind of company that you can safely bet on for the long term. Unlike many other technology and data-focused companies, IHS Markit's price appreciation hasn't gone through the roof in the past year. As a value-conscious investor, I've been wary in recent months of buying into stocks that have seen 1.5-2x appreciation since the start of 2017 (like the FANG stocks); so I've been looking down more unpaved roads to find bargains.

IHS was founded in 1959 as Information Handling Services, and according to its website, focused in its early days on providing catalog databases on microfilm for aerospace engineers. As IHS continued to grow, it expanded into a wide array of other industries, providing technical databases and proprietary information for benchmarking and comparison purposes. Its purchase of Markit in 2016 added its giant financial arm, which competes with the likes of Bloomberg. In addition, a well-researched prior article on this site covered IHS Markit's proficiency in distributed ledger technologies (DLT), making it a serious blockchain researcher. As we've seen with companies like Kodak (NASDAQ: KODK), even the slightest whiff of crypto-related news can tend to make a company spike.

What is particularly appealing about IHS Markit is its recurring revenue. Though not technically a software company as it provides data and not applications, its revenues stream can be thought of in the same way - clients subscribe to IHS' stream of data for a monthly or annual fee. More than four-fifths of the company's revenue is recurring.

Recurring revenue is such an attractive feature because it makes

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in INFO over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.