Information Services Group Inc. (NASDAQ: III)

Sector: Technology Industry: Information Technology Services CIK: 0001371489
Market Cap 281.35 Mn
P/B 2.97
P/E 28.80
P/S 1.17
ROIC (Qtr) 5.85
Div Yield % 3.91
Rev 1y % (Qtr) 1.77
Total Debt (Qtr) 68.51 Mn
Debt/Equity (Qtr) 0.72

About

Information Services Group, Inc. (ISG), represented by the ticker symbol III, is a prominent player in the digital transformation services industry. This global technology research and advisory firm offers a wide range of services to aid businesses in navigating the complexities of digital transformation. With a presence in over 20 countries and a diverse clientele spanning various industries, ISG has established itself as a trusted partner in digital transformation. ISG's main business activities encompass digital transformation services, sourcing...

Read more

Price action

Investment thesis

Bull case

  • Strong operating cash flow of 30.50M provides robust 0.45x coverage of total debt 68.51M, indicating excellent debt servicing capability and financial flexibility.
  • Healthy cash reserves of 28.83M provide 5765.60x coverage of short-term debt 5000, demonstrating strong liquidity position and minimal refinancing risk.
  • Tangible assets of 120.30M provide exceptional 11.20x coverage of deferred revenue 10.74M, showing strong service capability backing.
  • Robust free cash flow of 26.71M exceeds capital expenditure of 3.80M by 7.04x, indicating strong organic growth funding capability.
  • Operating cash flow of 30.50M provides solid 0.72x coverage of current liabilities 42.51M, showing strong operational health.

Bear case

  • Operating cash flow of 30.50M provides thin coverage of dividend payments of (11.49M) with a -2.65 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Cash reserves of 28.83M provide limited coverage of acquisition spending of 20.91M, which is 1.38x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
  • The company's operating cash flow of 30.50M shows concerning coverage of stock compensation expenses of 9.22M, with a 3.31 ratio indicating potential earnings quality issues.
  • Free cash flow of 26.71M represents just -3.82x of debt issuance (7M), suggesting concerning reliance on leverage rather than internal cash generation for growth.
  • Operating cash flow of 30.50M is outpaced by equity issuance of (8.84M) (-3.45 ratio), indicating concerning reliance on equity markets for funding operations.

Peer comparison

Companies in the Information Technology Services
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 IBM International Business Machines Corp 279.99 Bn 35.41 4.28 66.57 Bn
2 ACN Accenture plc 168.17 Bn 22.09 2.38 8.20 Bn
3 INFY Infosys Ltd 74.96 Bn 23.74 3.89 -
4 CTSH Cognizant Technology Solutions Corp 41.45 Bn 19.48 1.99 1.17 Bn
5 FIS Fidelity National Information Services, Inc. 35.21 Bn 231.62 3.36 13.00 Bn
6 WIT Wipro Ltd 29.93 Bn 19.70 2.97 1.95 Bn
7 BR Broadridge Financial Solutions, Inc. 26.38 Bn 28.51 3.74 3.28 Bn
8 LDOS Leidos Holdings, Inc. 23.72 Bn 16.88 1.37 5.23 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 1.49 1.44
EV to Cash from Ops. EV/CFO 10.43 5.63
EV to Debt EV to Debt 4.65 8.06
EV to EBIT EV/EBIT 17.56 -4.05
EV to EBITDA EV/EBITDA 18.28 -0.52
EV to Free Cash Flow [EV/FCF] EV/FCF 11.92 -1.66
EV to Market Cap EV to Market Cap 1.13 1.35
EV to Revenue EV/Rev 1.32 57.14
Price to Book Value [P/B] P/B 2.97 3.34
Price to Earnings [P/E] P/E 28.80 -5.47
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 0.85 -0.83
Dividend Payout Ratio % Div Payout % (Qtr) 90.00 0.66
Dividend per Basic Share Div per Share (Qtr) 0.18 0.47
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 32.43 6.24
Interest Coverage Int. cover (Qtr) 4.20 -319.17
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) 7.32 -253.62
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 194.79 114.15
Dividend Growth (1y) % Div 1y % (Qtr) 0.00 35.23
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 397.65 -22.49
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 108.74 -25.03
EBIT Growth (1y) % EBIT 1y % (Qtr) 542.43 -82.44
EBT Growth (1y) % EBT 1y % (Qtr) 510.25 97.07
EPS Growth (1y) % EPS 1y % (Qtr) 385.71 147.29
FCF Growth (1y) % FCF 1y % (Qtr) 41.44 -8,638.64
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 3.32 -8.24
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 1.13 0.78
Cash Payout Ratio Cash Payout (Qtr) 0.34 0.01
Cash Ratio Cash Ratio (Qtr) 0.68 0.66
Current Ratio Curr Ratio (Qtr) 2.22 2.12
Debt to Equity Ratio Debt/Equity (Qtr) 0.72 0.88
Interest Cover Ratio Int Coverage (Qtr) 4.20 -319.17
Times Interest Earned Times Interest Earned (Qtr) 4.20 -319.17
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 9.40 -550.76
EBIT Margin % EBIT Margin % (Qtr) 7.51 -775.74
EBT Margin % EBT Margin % (Qtr) 5.72 -827.89
Gross Margin % Gross Margin % (Qtr) 42.20 24.07
Net Profit Margin % Net Margin % (Qtr) 4.00 -830.34