IHS Inc. (IHS) has Unmatched Franchise Value with 75% Recurring Revenues

March 18, 2014

Managing Director James Hamel of Artisan Partners says IHS Inc. (IHS) is a stock pick with unmatched franchise value that is reasonably priced and showing 75% recurring revenues each year.

“I think of IHS as the Bloomberg-like data set provider for the energy industry…that repository of information that’s mission-critical — everything from the historical list of wells driven to productivity to who owns land, to what have the transaction values been in M&A through time — has been aggregated over a long period by IHS,” Hamel said.

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IHS Inc. also has a similar model for environmental and supply chain management, Hamel says. Additionally, IHS is seeing recurring revenues with a high retention rate and is expected to increase its organic growth.

“The franchise value isn’t yet well-recognized globally…which means it’s very reasonably priced even today, in our view, particularly given the fact that about 75% of its revenues recur every year with a very high retention rate,” Hamel said.

“We think IHS is on the cusp of a topline acceleration from about 4% to 5% organic growth most recently, to perhaps toward 7% to 8% organically,” Hamel added.

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