Information Services Group (III) AI Stock Analysis

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Information Services Group

(NASDAQ:III)

Rating:68Neutral

Price Target:

$5.00

▲( 5.04% Upside)

The overall stock score reflects a mix of strengths and weaknesses. Although the company is experiencing strong market momentum and promising growth in AI and the Americas, its declining financial performance, particularly in cash flow and profitability, poses concerns. Valuation metrics suggest the stock may be overvalued, but a solid dividend yield offers some compensation. The recent earnings call highlighted growth opportunities but also acknowledged geopolitical and regional challenges.

Positive Factors

Earnings

Earnings beat forecasts due to adjusted EBITDA margin overage, lower-than-expected interest expenses, and a lower-than-expected non-GAAP tax rate.

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. SPDR S&P 500 ETF (SPY)

Market Cap

$228.49M

Dividend Yield3.8%

Average Volume (3M)169.68K

Price to Earnings (P/E)30.8

Beta (1Y)0.67

Revenue Growth-12.26%

EPS GrowthN/A

CountryUS

Employees1,300

SectorTechnology

Sector Strength76

IndustryInformation Technology Services

Share Statistics

EPS (TTM)0.03

Shares Outstanding48,204,170

10 Day Avg. Volume306,592

30 Day Avg. Volume169,682

Financial Highlights & Ratios

PEG Ratio0.42

Price to Book (P/B)2.36

Price to Sales (P/S)0.00

P/FCF Ratio13.14

Enterprise Value/Market Cap1.16

Enterprise Value/Revenue0.25

Enterprise Value/Gross Profit2.82

Enterprise Value/Ebitda5.84

Forecast

1Y Price Target

$5.83

Price Target Upside22.48% 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 showed declining revenue and profit margins in 2024, with substantial deterioration in cash flow generation. Although the balance sheet reflects improved leverage ratios, the company's profitability and cash flow issues pose significant risks. The financial health suggests a need for strategic interventions to stabilize operations and improve cash flow.

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
64.92M	87.05M	85.97M	79.79M	84.73M
	Net Debt
41.84M	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 Price4.76

Price Trends

50DMA

3.90

Positive

100DMA

3.52

Positive

200DMA

3.38

Positive

Market Momentum

MACD

0.32

Negative

RSI

67.38

Neutral

STOCH

75.19

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 4.76 is above the 20-day moving average (MA) of 4.27, above the 50-day MA of 3.90, and above the 200-day MA of 3.38, indicating a bullish trend. The MACD of 0.32 indicates Negative momentum. The RSI at 67.38 is Neutral, neither overbought nor oversold. The STOCH value of 75.19 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 2 New Risks

We have risks associated with dispositions. Q4, 2024

We may not be successful in our artificial intelligence initiatives, which could adversely affect our business, reputation or financial results. Q4, 2024

Information Services Group Peers Comparison

Overall Rating

UnderperformOutperform

Sector (60)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
III	68 Neutral	$228.49M	30.84	8.09%	3.80%	-12.26%	―
TSSI	66 Neutral	$349.29M	32.96	137.01%	―	262.87%	873.76%
Sector *	60 Neutral	$11.56B	10.24	-7.04%	2.94%	7.46%	-10.54%
UIS	58 Neutral	$372.39M	―	192.24%	―	-1.72%	82.15%
PSFE	57 Neutral	$753.53M	39.11	-0.04%	―	3.50%	95.90%
TTEC	56 Neutral	$246.34M	―	-73.85%	1.08%	-9.86%	-2426.25%
TLS	47 Neutral	$192.53M	―	-38.32%	―	-21.83%	-67.07%

* Technology Sector Average

Performance Comparison

III

Information Services Group

4.76

1.76

58.67%

TTEC

TTEC Holdings

5.18

-1.49

-22.34%

UIS

Unisys

4.99

0.30

6.40%

TSSI

TSS

11.34

9.94

710.00%

PSFE

Paysafe

11.75

-6.63

-36.07%

TLS

Telos

2.48

-1.58

-38.92%

Information Services Group Earnings Call Summary

Earnings Call Date:May 08, 2025

(Q1-2025)

% Change Since: 19.00%|

Next Earnings Date:Aug 11, 2025

Earnings Call Sentiment Neutral

The earnings call presented a solid performance in Q1 with strong growth in the Americas and significant improvements in adjusted EBITDA and AI client base. However, there were concerns related to declining revenues in Europe and Asia-Pacific and geopolitical uncertainties impacting future performance.

Q1-2025 Updates

Positive Updates

Strong Q1 Revenue Growth

ISG delivered Q1 revenues of $60 million, up 5% excluding results from the divested automation unit. Growth was led by the Americas, up 17%, marking the largest year-over-year growth quarter in the Americas in the last two years.

Significant Increase in Adjusted EBITDA

Adjusted EBITDA was up 68% to $7.4 million, with an adjusted EBITDA margin increase of more than 550 basis points to 12.4%.

Expansion in AI Client Base

ISG served more than 200 clients with AI-focused research and advisory services in the trailing 12 months, up from 150 clients noted last quarter.

ISG Tango Platform Growth

The ISG Tango platform saw more than $9 billion of contract value flow through it, up more than 30% from the previous quarter.

Key Client Engagements

Successful engagements included a $1 million plus engagement with a leading CPG company and a $2 million plus engagement with a multinational food processing company.

Negative Updates

Decline in European and Asia-Pacific Revenues

Europe revenue was down 13% and Asia-Pacific revenue was down 15% due to factors such as sluggish Australian government spending.

Cash and Debt Concerns

Cash decreased to $20.1 million from $23.1 million at the end of the fourth quarter. Net cash provided by operations was only $1 million, while $2.2 million was paid in dividends and $3.3 million in stock repurchases.

Geopolitical and Economic Uncertainties in Europe

Continued uncertainty in Europe due to geopolitical issues, including the Ukraine war, and economic challenges are impacting buyer behavior.

Company Guidance

During the Information Services Group (ISG) First Quarter 2025 Conference Call, the company provided optimistic guidance for the upcoming quarter, reflecting strong market demand in the Americas and a cautious outlook in Europe. ISG's Q1 2025 revenues reached $60 million, marking a 5% increase, with the Americas region growing by 17%. The company's adjusted EBITDA rose by 68% to $7.4 million, with margins improving over 550 basis points to 12.4%. Recurring revenues contributed $26 million, representing 44% of total revenues. For Q2 2025, ISG projects revenues between $59.5 million and $60.5 million and an adjusted EBITDA between $7 million and $8 million. The company highlighted its strategic focus on AI and digital transformation, noting significant traction with its AI-powered platforms, particularly ISG Tango, which now processes over $9 billion in contract value.

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.