Information Services Group (III) AI Stock Analysis

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Information Services Group

(NASDAQ:III)

61Neutral

Information Services Group faces challenges with declining revenues and cash flow issues, but its strategic shift towards AI services and recent operational improvements provide a foundation for recovery. The stock's technical indicators and positive earnings call outlook contribute moderately to its performance, balancing the risks suggested by its high valuation.

Positive Factors

Analyst Recommendation

Analyst's recommendation for ISG stock is rated OUTPERFORM, with a maintained 12-month price target offering 14% upside potential.

Earnings

Earnings beat forecasts with non-GAAP EPS and adjusted EBITDA higher than expected, showing strong financial performance.

Sales Momentum

The company expects solid sales momentum in the Americas region and strengthening in the European and APAC regions, driving adjusted revenue growth.

Negative Factors

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

$175.17M

Dividend Yield4.96%

Average Volume (3M)134.95K

Price to Earnings (P/E)64.7

Beta (1Y)0.64

Revenue Growth-14.93%

EPS Growth-54.76%

CountryUS

Employees1,289

SectorTechnology

Sector Strength62

IndustryInformation Technology Services

Share Statistics

EPS (TTM)0.05

Shares Outstanding48,255,150

10 Day Avg. Volume96,582

30 Day Avg. Volume134,948

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

$5.25

Price Target Upside44.63% 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

Positive

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.

Balance Sheet

Positive

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.

Cash Flow

Negative

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.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
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

Technical Analysis Sentiment

Positive

Last Price3.63

Price Trends

50DMA

3.44

Positive

100DMA

3.38

Positive

200DMA

3.28

Positive

Market Momentum

MACD

0.03

Positive

RSI

51.54

Neutral

STOCH

62.22

Neutral

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 3.63 is below the 20-day moving average (MA) of 3.69, above the 50-day MA of 3.44, and above the 200-day MA of 3.28, indicating a neutral trend. The MACD of 0.03 indicates Positive momentum. The RSI at 51.54 is Neutral, neither overbought nor oversold. The STOCH value of 62.22 is Neutral, 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 (59)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
TSSI	68 Neutral	$188.47M	31.30	111.84%	―	172.33%	8237.50%
III	61 Neutral	$175.17M	64.73	2.86%	4.96%	-14.93%	-54.76%
Sector *	59 Neutral	$10.73B	10.22	-6.68%	3.02%	7.43%	-11.37%
PSFE	55 Neutral	$921.45M	44.04	2.51%	―	6.48%	―
TTEC	49 Neutral	$202.21M	―	-75.62%	1.42%	-10.32%	-3860.81%
UIS	44 Neutral	$289.96M	―	192.24%	―	-0.35%	55.51%
TLS	44 Neutral	$200.65M	―	-36.71%	―	-25.52%	-46.44%

* Technology Sector Average

Performance Comparison

III

Information Services Group

3.63

0.36

11.01%

TTEC

TTEC Holdings

4.23

-3.62

-46.11%

UIS

Unisys

4.08

-1.35

-24.86%

TSSI

TSS

7.53

6.70

807.23%

PSFE

Paysafe

15.53

0.88

6.01%

TLS

Telos

2.68

-0.92

-25.56%

Information Services Group Earnings Call Summary

Earnings Call Date: Mar 6, 2025 | % Change Since: 18.63% | Next Earnings Date: May 8, 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.