A Board Member Bought About $50,000 Worth of IHS

IHS’s peers include FactSet Research Systems Inc. (NYSE:FDS), Dun & Bradstreet Corp (NYSE:DNB), Thomson Reuters Corporation (NYSE:TRI), and Moody’s Corporation (NYSE:MCO). The forward P/E of 20 places IHS at a premium to these other companies; FactSet is the closest at 19 times forward earnings estimates. FactSet’s most recent quarterly report showed revenue and net income growth in the high single digits versus a year earlier, so we’d also be skeptical that it is undervalued. The other three companies have all been reporting high earnings growth, though in the cases of Dun & Bradstreet and Thomson Reuters this has occurred despite a decline in sales. As a result we have to be wary of those two peers as well, though Dun & Bradstreet does at least look cheap at trailing and forward P/E of 13 and 10 respectively. Moody’s is more in “growth at a reasonable price” territory, with earnings multiples in the high teens. It might be worth further consideration, though we’d be wary of such a large company continuing to out-grow these other businesses we’ve mentioned.

We don’t think that investors should be imitating this insider purchase. As we’ve mentioned, IHS should have more growth ahead of it but the valuation look high considering that growth rates, particularly in terms of revenue, seem to be slowing. We would prefer to take a closer look at Dun & Bradstreet from a pure value perspective, and at Moody’s to study whether or not it can maintain high growth rates.

Disclosure: I own no shares of any stocks mentioned in this article.