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Information Services Group (III)
NASDAQ:III
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Information Services Group
(NASDAQ:III)
61Neutral
Positive Factors
Financial Performance
Earnings beat forecasts due to adjusted EBITDA margin overage, lower-than-expected interest expenses, and a lower-than-expected non-GAAP tax rate.
Sales Growth
The company expects solid sales momentum in the Americas region and strengthening in the European and APAC regions, driving adjusted revenue growth.
Negative Factors
Guidance Reduction
Management reduced its Q3/24 adjusted EBITDA guidance range to $6.5-7.0 million from $7.0-8.0 million.
Revenue Decline
Total organic revenue declined 16% on a year-over-year basis, indicating a decrease in overall business activity.
Information Services Group (III) vs. S&P 500 (SPY)
Market Cap
$180.47M
Dividend Yield4.8%
Average Volume (3M)130.88K
Price to Earnings (P/E)66.0
Beta (1Y)0.89
Revenue Growth-14.93%
EPS Growth-54.76%
CountryUS
Employees1,289
SectorTechnology
Sector Strength43
IndustryInformation Technology Services
Share Statistics
EPS (TTM)0.05
Shares Outstanding48,255,150
10 Day Avg. Volume175,885
30 Day Avg. Volume130,880
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)0.73
Price to Cash Flow (P/CF)6.90
P/FCF Ratio6.20
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$5.25Price Target Upside40.00% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering3
Information Services Group Business Overview & Revenue Model
Company DescriptionInformation Services Group (ISG) is a leading global technology research and advisory firm. The company specializes in digital transformation services, including automation, cloud solutions, data analytics, and cybersecurity. ISG serves clients across various sectors, including financial services, healthcare, energy, and manufacturing, providing insights and guidance to help organizations optimize their operations and embrace digital innovation.
How the Company Makes MoneyInformation Services Group makes money through a combination of consulting services, research subscriptions, and managed services. The company generates revenue by providing strategic advisory services that help clients navigate complex technology landscapes and implement effective digital strategies. Additionally, ISG sells research reports and benchmarking data that organizations use to make informed business decisions. The firm also earns income through managed services contracts, where it offers ongoing support and maintenance for clients' IT operations. Key partnerships with technology providers and industry alliances further enhance ISG's market presence and contribute to its revenue streams.
Information Services Group Financial Statement Overview
Summary
Information Services Group's financial performance in 2024 showed declining revenue and profit margins, with substantial deterioration in cash flow generation. Despite improved leverage ratios, the company's profitability and cash flow issues pose significant risks, suggesting a need for strategic interventions.Income Statement
The revenue decreased from $291.05M in 2023 to $247.58M in 2024, indicating a negative growth rate. Gross profit margin in 2024 was 100%, but this seems questionable and possibly incorrect, as gross profit traditionally cannot equal total revenue. Net profit margin reduced from 2.11% in 2023 to 1.15% in 2024, indicating weakened profitability. EBIT and EBITDA margins also declined, reflecting decreased operating efficiency.65
Positive
Balance Sheet
The debt-to-equity ratio improved significantly from 0.85 in 2023 to 0.04 in 2024, indicating reduced leverage. Return on equity (ROE) dropped from 6.03% in 2023 to 2.95% in 2024, reflecting decreased profitability per equity dollar. The equity ratio remained stable around 47%, indicating a balanced financial structure.68
Positive
Cash Flow
The company reported zero operating and free cash flow in 2024, indicating potential liquidity or operational efficiency issues. The inability to generate cash from operations is a significant concern, especially compared to previous years where there was positive cash flow.40
Negative
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 247.59M | 291.05M | 286.27M | 277.83M | 249.13M | Gross Profit |
| 97.28M | 112.14M | 116.62M | 109.36M | 99.25M | EBIT |
| 5.76M | 14.61M | 29.48M | 25.27M | 9.27M | EBITDA |
| 16.95M | 21.21M | 35.05M | 30.60M | 18.57M | Net Income Common Stockholders |
| 2.84M | 6.15M | 19.73M | 15.53M | 2.75M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 23.07M | 22.64M | 30.59M | 47.52M | 43.73M | Total Assets |
| 204.51M | 247.34M | 243.03M | 236.79M | 239.52M | Total Debt |
| 3.42M | 87.05M | 85.97M | 79.79M | 84.73M | Net Debt |
| -19.66M | 64.42M | 55.38M | 32.27M | 41.00M | Total Liabilities |
| 108.23M | 145.26M | 142.60M | 138.40M | 140.38M | Stockholders Equity |
| 96.29M | 102.08M | 100.43M | 98.39M | 99.14M |
| Cash Flow | Free Cash Flow | |||
| 17.04M | 8.84M | 7.72M | 39.62M | 42.79M | Operating Cash Flow |
| 19.86M | 12.27M | 11.15M | 41.94M | 43.97M | Investing Cash Flow |
| 18.99M | -4.43M | -6.87M | -2.32M | -3.50M | Financing Cash Flow |
| -37.91M | -16.20M | -18.94M | -34.13M | -15.70M |
Information Services Group Technical Analysis
Positive
3.75
Price Trends
3.32
Positive
3.34
Positive
3.23
Positive
Market Momentum
0.20
Negative
72.21
Negative
81.16
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For III, the sentiment is Positive. The current price of 3.75 is above the 20-day moving average (MA) of 3.63, above the 50-day MA of 3.32, and above the 200-day MA of 3.23, indicating a bullish trend. The MACD of 0.20 indicates Negative momentum. The RSI at 72.21 is Negative, neither overbought nor oversold. The STOCH value of 81.16 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for III.
Information Services Group Risk Analysis
Information Services Group disclosed 35 risk factors in its most recent earnings report. Information Services Group reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Information Services Group Peers Comparison
Overall Rating
UnderperformOutperform
Sector (57)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
75 Outperform | $188.72B | 24.88 | 27.26% | 1.84% | 4.10% | 9.78% | |
75 Outperform | $31.11B | 23.90 | 122.93% | ― | 6.10% | 44.57% | |
75 Outperform | $780.48M | 26.76 | 28.82% | 1.59% | 5.82% | -14.46% | |
72 Outperform | $36.24B | 16.26 | 16.21% | 1.76% | 1.98% | 7.16% | |
61 Neutral | $180.47M | 65.96 | 2.86% | 4.80% | -14.93% | -54.76% | |
57 Neutral | $20.94B | 10.43 | -13.41% | 2.52% | 4.53% | -23.34% | |
47 Neutral | $2.97B | 267.98 | -2.46% | ― | -5.65% | 78.20% |
* Technology Sector Average
Performance Comparison
III
Information Services Group
3.75
0.04
1.08%
ACN
Accenture
285.06
-41.30
-12.65%
CTSH
Cognizant
68.74
-1.22
-1.74%
IT
Gartner
383.24
-88.63
-18.78%
HCKT
The Hackett Group
27.15
4.30
18.82%
DXC
DXC Technology
14.85
-6.02
-28.85%
Information Services Group Earnings Call Summary
Earnings Call Date: Mar 6, 2025 | % Change Since: 22.55% | Next Earnings Date: May 12, 2025
Earnings Call Sentiment Positive
ISG reported strong financial performance in Q4 with improvements in EBITDA and profitability, supported by a successful strategic repositioning towards AI-centered services. While the company faced revenue declines in Europe and Asia Pacific, the positive outlook for the U.S. market and strategic moves such as the sale of its automation unit provided a strong foundation for future growth.Highlights
Strong Fourth Quarter Financial Performance
ISG achieved fourth-quarter revenues of $58 million and adjusted EBITDA of $6.5 million, improving EBITDA margins by more than 200 basis points from a year ago. The company also improved its profitability with adjusted EBITDA up 11%.
Successful Sale of Automation Unit
ISG sold its automation unit for more than $20 million in cash, significantly improving its balance sheet and allowing for a $7 million debt reduction in the quarter.
Increase in Utilization and Cash Flow
Consulting utilization increased to 72% from 65% year-over-year. The company generated strong cash flow from operations, with $6.6 million in Q4 and over $15 million in cash in the last two quarters.
AI-Centered Strategic Repositioning
ISG repositioned as a global AI-centered technology research and advisory firm, reflecting its investments in AI, which have become central to its operations and client engagements.
Positive Market Trends and Outlook
ISG sees a resurgence in cloud transformation and market hesitation lifting, with positive signs of increasing demand for technology services, particularly in the U.S.
Lowlights
Revenue Decline in Europe and Asia Pacific
Europe's Q4 revenues were down 15% due to challenging macro conditions, and Asia Pacific's revenues were down 16%, affected by reduced government spending in Australia.
Overall Revenue Decrease
Fourth quarter revenue was $57.8 million, down 2% versus the prior year, although this is presented excluding automation.
Company Guidance
During the Information Services Group's fourth quarter 2024 conference call, the company reported significant financial and operational achievements. ISG successfully sold its automation unit for over $20 million, enhancing its balance sheet and reducing debt by $7 million in the quarter, totaling a 25% debt reduction for the year. The firm generated revenues of $58 million, with adjusted EBITDA of $6.5 million, improving EBITDA margins by more than 200 basis points year-over-year. The Americas region saw a 6% revenue increase, excluding the automation unit, while recurring revenues comprised 45% of firm-wide revenues. ISG's strategic shift focuses on AI-centered services, with the company serving over 100 clients with AI-focused research and advisory services in the past year. They foresee growth in AI-related activities as enterprises adopt AI more broadly, and they anticipate first-quarter revenues between $58 million and $59 million, with adjusted EBITDA between $6.5 million and $7.5 million, reflecting a 45% increase from the previous year.Information Services Group Corporate Events
Executive/Board Changes
Information Services Group Extends CEO Contract to 2029
Positive
Jan 3, 2025
Information Services Group, Inc. has extended the employment agreement of its Chairman and CEO, Michael P. Connors, until December 31, 2029. As part of this extension, Connors receives restricted stock units and a potential cash bonus linked to performance targets, which reflects the company’s commitment to retaining leadership and aligning executive incentives with corporate performance goals.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.