At US$92.87, Is IHS Markit Ltd. (NYSE:INFO) Worth Looking At Closely?

By
Simply Wall St
Published
February 19, 2021
NYSE:INFO

IHS Markit Ltd. (NYSE:INFO) saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s examine IHS Markit’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for IHS Markit

Is IHS Markit still cheap?

IHS Markit is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that IHS Markit’s ratio of 42.32x is above its peer average of 27.78x, which suggests the stock is trading at a higher price compared to the Professional Services industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since IHS Markit’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What kind of growth will IHS Markit generate?

earnings-and-revenue-growth
NYSE:INFO Earnings and Revenue Growth February 19th 2021

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. IHS Markit's earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? INFO’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe INFO should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on INFO for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for INFO, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. While conducting our analysis, we found that IHS Markit has 3 warning signs and it would be unwise to ignore them.

If you are no longer interested in IHS Markit, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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