The Corporate Executive Board Company (CEB): Does This Stock Deserve a Premium Over Its Peers?

Page 1 of 2

During my schooling days, I preferred to seek assistance from my peers, and not private tutors, when I faced difficulties with my academic work. I felt that peers understood the problems I faced from a similar perspective. Corporate executives are thinking in a similar fashion, ditching expensive external consultants for access to the wisdom of peers through member networks. The Corporate Executive Board Company (NYSE:CEB), a member-based advisory company providing subscription-based best-practices research to corporate executives, is a beneficiary of this trend.

Network economics where the strong get stronger

Corporate executives are able to access research published by The Corporate Executive Board Company (NYSE:CEB) based on actual case studies of similar problems that others have encountered, and how they solved the problems. In addition to useful desktop research and analysis, Corporate Executive Board also helps to link its members with other consenting members. Like stock exchanges and social networking sites, the value of Corporate Executive Board’s networks grows with additional members, as they contribute to an increasing body of information, knowledge, and experiences.

Facebook Inc (NASDAQ:FB)

Critics will cite the example of how Facebook Inc (NASDAQ:FB) replaced MySpace as the top social network in the U.S., to support the argument that network effects are rarely sustainable. While there are low switching costs involved with changing to another social network or having multiple social network accounts, there is much more at stake for high ranking white collar executives. Corporate Executive Board counts more than 10,000 organizations, and over 200,000 executives, among its members. For corporate executives, switching to an inferior network could mean losing your job if you fail to make the right decisions.

Substitution effect not significant as alternatives are less appealing

There are two reasons why organizations and executives prefer subscribing to The Corporate Executive Board Company (NYSE:CEB)’s membership program over other alternatives, such as hiring external consultants.

Firstly, the cost of subscribing to Corporate Executive Board’s membership program is small, relative to fees that consultants charge. According to a 2006 Fool.com article, membership cost about $35,000 per program then. Also, Corporate Executive Board charges a fixed annual fee, as opposed to out-of-pocket expenses and other one-offs that consultants include in their bill.

Secondly, no single individual wields significant influence over the value of the program under Corporate Executive Board’s model. Any individual member who drops out of the program is going to have a minimal impact on the overall value of the program membership. On the contrary, if one or two ‘stars’ leave the consulting team, the quality of the advice offered by external consultants might drop by more than just a notch.

Growth drivers

The Corporate Executive Board Company (NYSE:CEB) is targeting long term annual growth rates of between 8%-13%, by increasing customer accounts and expanding geographical scope. Currently, close to 90% of Corporate Executive Board’s client base are Fortune 500 companies, suggesting that it has the ability to price discriminate and target smaller sized companies with lower fees. There is also room for growth in certain geographic regions such as Southern Europe, which accounted for less than 2% of its turnover.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Top 10 Jobs for 2014 by Salary Gain (Predictions)

Top 5 Digital Trends for 2014

Top 6 Things You Can Do To Increase Your Productivity

Top 9 Trending Smartphones in 2013

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!