IHS Inc. (NYSE: IHS) provides
documents, decision-support tools and related services to customers in a variety of technical fields. The firm's Energy division delivers oil and gas data on exploration, development, production, and transportation activities to energy producers and oil companies. Its Engineering division provides technical specifications and standards, regulations, parts data, design guides and other information to customers in the defense, aerospace, construction, energy, electronics and automotive industries. Customers include Amgen (NASDAQ: AMGN), Boeing (NYSE: BA) and DuPont (NYSE: DD).
The company surprised the Street last week, when it reported Q2 EPS of 46 cents and revenues of $207.2 million. Analysts had been expecting 44 cents and $200.5 million. According to the CFO, the underlying subscription-based business continued to perform very well, helping to generate top-line growth, margin expansion and a record quarterly cash flow from operations. As a result, the firm was able to re-pay money borrowed at the start of Q2 for three March acquisitions. Management also guided FY08 revenues to about $833.0-$846.7 million, versus consensus of $842.80 million.
The stock
popped on the news and then moved into a bullish "pennant" consolidation pattern. Prices frequently exit pennants moving in the same direction they were traveling on entry. In this case, that would be to the upside.
Brokers recommend the issue with three "strong buys" and four "buys". Analysts see a 22% growth rate, through the next year. The IHS Price to Book ratio (4.76), Price to Free Cash Flow ratio (27.04), Sales Growth rate (33.76%), EPS Growth rate (43.75%) and Net Profit Margin (11.51%) compare favorably with industry, sector and S&P 500 averages. Institutions hold about 75% of the outstanding shares. Over the past 52 weeks, the stock has traded between $44.08 and $72.19. A stop-loss of $59.90 looks good here.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold positions in any of the stocks mentioned above.
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