Recurring Revenues, Limited Competition Make IDC A Must Buy
Interactive Data Corp (NYSE: IDC) is a global provider of financial market data, analytics and related services to financial institutions, active traders and individual investors. The company has four businesses, grouped into 2 major categories. While the Institutional Services category accounts for 88% of the total revenues, the Active Trader Services category consists solely of the eSignal business. IDC has most of its business in the US, which accounts for 70% of its sales. With only about 27% of the company’s sales originating from Europe and the rest from Asia, Interactive Data is focusing on expanding its operations in the oversees market.
For international expansion, IDC had purchased a controlling interest in Japanese financial data provider NTT Data Financial (NDF) and Italian data firm Klers in 2008. IDC has also been reassessing its business products after the 2008-09 market meltdown.
IDC has no debt and cash reserves of about $290.23 million. Returns on capital, including the effects of goodwill, have not been too impressive, at about 14.48% for the trailing twelve months. However, the company’s business model is highly profitable, with operating margins averaging 28.32%. At the current price of $29.07, the company’s stock is trading at 16.07 times the earnings. IDC faces little effective competition and, with a renewal rate of 95%, most of the company’s revenues are recurring. Moreover, the company offers a dividend yield of 3.2%. All in all, the company’s stock is an attractive investment option.
