Interactive Data Corp. (IDC)

Volatility, volatility, volatility.

Solid company with steadily growing free cash flow and its rated 5 stars.

Dominance, Low debt, Necessary & Valued service, Entry Barriers

good divident; no debt; little effective competition.

IDC draw together an enormous amount of data, and although there's always the possibility that customers will decide to do this for themselves it would be a massive undertaking, so who would want to?

Economic worries slam stocks. Now that's what I call GOOD news.

Provides info that many businesses need.
Large customer base with high switching costs helps them retain customers and thus revenues stay high

To keep it simple I like this company and this is why

1: All traders, investors, moeny managers need basic information, valuation, numbers about companies and IDC provides it, whats better then that. we are literally on their mercy.

2)Its one of buy now list, David and Tom are good really good. They know how to crunch numbers better then most. when they say yes, we gotta listen.

3) Dividend

4)Management

Business Summary

Interactive Data Corporation (IDC) is a financial data and information provider. The company has 4 business lines grouped into 2 major categories. The Institutional Services category contributes 88% of revenue and consists of 3 businesses. Interactive Data Processing and Reference (63% of total sales) provides information such as quotes, dividends, credit ratings, and background information. Interactive Data Real-Time Services (20%) provides service for real-time quote applications. Interactive Data Fixed-Income Analytics (4%) sells data and analysis tools for researching bonds and other fixed income instruments. The second category is Active Trader Services and consists solely of the eSignal business (12% of sales). eSignal is geared towards technical analysis tools for individual investors. IDC earns most of its revenues through subscriptions to its services, and also makes a small amount on website advertising. 70% of sales come from the U.S., about 27% from Europe, and the rest from Asia. IDC's data is delivered through software application programming interfaces (APIs) which can be integrated into custom applications like websites and computer programs.

Growth Strategy

IDC has several avenues for growth. The first is through developing new products and then cross-selling them to existing customers. The company has been focusing on products to assess risk, a particular concern after the 2008-09 market meltdown. International expansion is another focus, as over 70% of sales are inside the U.S. IDC has utilized acquisition to acheive this, purchasing a a controlling interest in Japanese financial data provider NTT Data Financial (NDF) and Italian data firm Klers in 2008. IDC also benefits from the development of new financial products, and recently won contracts to service real-time data for Wilshire indexes and ETF.com. More generally, financial tools and websites continue to proliferate, creating a growing market for IDC's services. A recently expanded data center is expected to reduce costs while doubling IT capacity.

Competitive Position

IDC competes with several well-known data providers in its main businesses. In Pricing/Reference and Real-Time services, the primary competitor is Thomson-Reuters (TRI), and in Fixed-Income Analytics, FactSet Research (FDS) provides similar products. eSignal's only major direct competitor is TradeStation (TRAD), although IDC is significantly larger and eSignal is generally recognized as a best-in-class product. IDC's scale (the firm is smaller than Thomson but much larger than FactSet or TradeStation) allows it to under-price smaller competitors if the need arises. The company has a wide and varied customer base, serving over 4,000 institutional customers. Switching costs seem to be relatively high, as the firm enjoys a 95% renewal rate on its subscription businesses. Once IDC's APIs are implemented, switching them out for a competitor's is time consuming and error prone, and only undertaken if the benefits are great.

Risks

The financial services industry has been in upheaval since late in 2008, with many large banks and brokerage firms consolidating or going under entirely. This leads to lower overall customer count, lower subscription volumes (what was previously 2 subscriptions becomes 1), and less pricing power as larger customers can exert influence over pricing. IDC has a history of overpaying for acquisitions, as nominal ROIC 5-year average is a pedestrian 13% and the majority of assets are in goodwill accounts. These large goodwill accounts are subject to impairment charges which can greatly affect the bottom line in any given quarter. Negative currency effects have been a thorn for the past year or so, as 30% of revenues are repatriated from offshore, although this can work in the opposite direction as well. Pearson, a large international media company, owns a majority 62% stake of IDC's shares and can obviously have significant influence over business decisions and direction.

Management

Raymond D'Arcy recently succeeded Stuart Clark as IDC's President and CEO, as part of the formal succession plan the firm has adopted. He is a company insider, having served in a variety of marketing and product management roles at IDC during his 30-year career there. Executive compensations are reasonable, with the majority coming in restricted stock and option awards, aligning the long-term interests of management with shareholders. Insider ownership is low at under 3%. IDC instituted a dividend 4 years ago and has consistently raised the payout each year, including a large "special" one-time dividend in 2008. Share repurchases have limited share dilution to low rates. Overall, stewardship has been fairly good, although a history of overpaying for acquisitions is concerning.

Financial Health

IDC is in good financial health. The company has no debt and cash reserves of about $270 million. Returns on capital, including the effects of goodwill, have been just okay at about 13% over the past 5 years, but on a Magic Formula basis (subtracting out goodwill and intangibles) they come in at near 197%! Regardless, the business model is highly profitable, with operating margins averaging 26%, and also a strong cash generator with free cash flow margins averaging over 18%.

MagicDiligence Opinion

IDC has a nice business model that is highly profitable and relatively non-capital intensive. The main capital investment is in computing equipment for storage, which can be leveraged across IDC's wide customer base. Also, revenues are recurring with a 95% renewal rate, and IDC has the ability to grow by cross-selling new or existing products to current customers, which saves significant resources on new customer acquisition through marketing. While the turmoil in financial markets is a concern, the firm is still expecting single-digit revenue growth for 2009, and long term analysts forecast a 10% annual profit growth. This kind of growth potential, combined with a highly profitable, cash generating business model; scale and lock-in competitive advantages; and a 3.6% dividend yield make this a very attractive MFI stock worthy of a Top Buy recommendation.

Primary reason for an expected increase in price is that IDC is a decent well run company on a slow uptrack which is trading at the bottom end of an acending price channel. Thus I expect it to rise into the high 20's. For the long run I see it adequately priced but not a bargain by any means. The stock is a slow grower - using most of its earnings for dividends. I don't see adequate growth in book value after taking account dividends. Thus, some of its growth by acquisition may have been dilutive in some way. Worth added research. Demand for data should increase but IDC's only real advantage in exploiting it is in sales and dsitribution. They seem to be at the low end of the value chain.

All financial institutions and investors need data in order to evaluate and research stocks/companies. Since Interactive Data Corp provides financial & analytical data, it makes sense that their services will become more and more necessary, and there doesn’t appear to be a lot of competition in this area. Also, individual investors need data in order to make wise picks and it seems more investors want control of their portfolios after the 2008 disaster.

MF pick and poised for when everybody else gets back in the market.

I like their market dominance and innovative qualities for at least the next 5 years

E-Signal is a great product for the serious investors! It has helped me a whole lot.

Already an important data source and will become more important as investing volume increases. Data will reign over emotions for awhile at least.

Gathering and providing data in an increasingly complex but interrelated world will keep this company profitable and growing for the foreseeable future.

- 95% customer retention rate
- 30% international sales and growing
- USD 244m in cash, no debt
- P/E 15 with organic growth of 8% in Q1 (a bad quarter)

Risks:
- The world of "easy access to cash + easy acquisition targets" may be gone
- IDC does not own the data, just packages it

Finviz.com - Channel up

provider of financial and business information to institutional and retail investors. It supplies time-sensitive pricing, dividend, and descriptive information for about 3.5 million securities. Interactive Data Corp. also provides fixed-income portfolio analytics, consulting, and valuation services to portfolio managers

Good customer renewel rates across its business lines and lower tax rates in some countries helped with their increased income, but due to difficulties in the financial services industry could cause some problems for their bottom line.

Unveiled the Quotrek 2.0 platform which provides higher capabilities of income cellphones. Integrated the BATS Exchange programming into its products to help increase the number of data and information proveders on its network. The arrangement helps reduce costs while still delivering up to the minute information to subscribers.