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Insights on Investment: Growing Opportunities in Business Information Stocks Insights on Investment: Growing Opportunities in Business Information Stocks

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The business information industry, amidst the wave of remote work, is reaching unprecedented heights. Companies in the Zacks Business – Information Services sector, like Experian plc EXPGY, FactSet Research Systems Inc. FDS, and Intertek Group plc IKTSY, are capitalizing on this trend to offer innovative services that cater to the need for risk management, cost efficiency, and productivity enhancement.

About the Business Information Industry

The Zacks Business – Information Services industry encompasses a spectrum of services such as software, data, risk assessment, research, information, and analytics. These firms operate in a dynamic landscape marked by shifting consumer behaviors, preferences, and demographics. Focus has now shifted towards leveraging technology, digital transformation, and data-driven decision-making to pinpoint demand sources and tailor services to target markets.

Key Trends Shaping the Industry’s Future

Robust Demand Atmosphere: In the recent past, the industry has experienced a mature and steadily growing business environment. Post-pandemic recovery is expected to further boost revenues, profits, and free cash flows.

Focus on Customer-Centric Solutions: The pandemic has accelerated the need for solutions that mitigate risks, cut costs, and enhance productivity, creating new prospects for industry players. Companies are adapting their strategies to deliver customer-focused solutions.

Rising Technology Adoption: The industry’s growth will be fueled by increased digitization, automation, and the utilization of big data to improve business information. Companies are transitioning from traditional data services to more specialized offerings like data analytics, financial consultancy, and operational advisory services.

An Upbeat Outlook for Business Information Services

The Zacks Business – Information Services industry, part of the broader Zacks Business Services sector, holds a Zacks Industry Rank #46, positioning it in the top 18% among over 250 Zacks industries. The industry’s Industry Rank, which averages the Zacks Rank of its members, signals promising growth prospects in the near term. Historical data suggests that top-performing Zacks industries outpace the bottom 50% by more than two to one.

Now, before delving into potential stock picks, let’s analyze the industry’s recent stock performance and valuation.

Industry Performance Overview

Over the past year, the Zacks Business – Information Services sector has outperformed the Zacks Business Services sector but lagged behind the S&P 500 Composite.

In the last year, the industry grew by 24.4%, lower than the S&P 500 Composite’s 29.4% and the broader sector’s 29.1%.

One-Year Stock Performance

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Industry Valuation Analysis

Based on the forward 12-month price-to-earnings (P/E) ratio, commonly used for valuing business information services stocks, the industry currently trades at 27.87X. In comparison, the S&P 500 stands at 20.94X, and the sector at 26.13X.

In the last five years, the sector’s P/E ratio has fluctuated between 21.13X and 27.53X, with a median of 25.69X, as illustrated in the charts below.

Price to Forward 12 Months P/E Ratio

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Top 3 Business Information Service Stocks in Focus

Below are three stocks projected to see growth in the near future:

Experian: Leveraging data services and analytical tools, Experian is thriving due to acquisitions and new business ventures. The company’s revenue streams are bolstered by major product lines and innovative offerings.

Currently holding a Zacks Rank #2 (Buy), Experian’s estimated fiscal 2024 earnings have been upgraded by 0.7% to $1.45 per share in the last 60 days. The stock has surged by 30.7% over the past year.

FactSet Research Systems: With over 40 years of experience, FactSet provides data, analytics, and technology services to global finance professionals. The company continues to expand its client base and global reach, indicating a positive growth trajectory.

Holding a Zacks Rank #2, FactSet’s fiscal 2024 earnings estimate stands at $15.76 per share, unchanged in the past 60 days. The stock has risen by 15.7% in the last year.

Intertek: Known for quality assurance solutions, Intertek’s investments, acquisitions, and cost-effective strategies are driving its growth. The company’s assurance, testing, inspection, and certification portfolio is experiencing heightened demand for its services.

Earning a Zacks Rank #2, the company’s projected 2024 earnings were revised 2.4% upward to $3.01 per share in the last 60 days. The stock has seen a 26.3% increase in the past year.

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