Hello Friends!  Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice!  As always, please remember that I am an amateur investor, so please remember to consult with your professional investment advisers prior to making any investment decisions based on information on this website.

As part of my continued effort at transparency on this website, I have been reviewing my actual holdings in my Trading Account approximately every three weekends.   Currently with 13 positions, this will take me about 39 weeks to complete the cycle.  Three weeks ago I reviewed Harris Corporation.   Going alphabetically (by symbol) brings me up to IHS Corp (IHS).  Let's take a closer look at this stock and see whether it still deserves a spot on my blog and in my own investment portfolio.

Currently I own 140 shares of IHS which closed at $64.20 on December 21, 2007. These shares were acquired 10/1/07 with a cost basis of $58.53, giving me an unrealized gain of $5.67 or 9.7% since purchase.  This is actually the second time that I have owned IHS.  I purchased shares 3/22/07, only to see them decline to a sale point 4/9/07 at which time those shares were sold resulting in a $(465.98) loss in a couple of weeks time.

I am occasionally asked about whether I will 'revisit' a stock after having solid it at a loss.  I think that IHS demonstrates that I do keep these stocks on my investing 'horizon' even if they are sold on what I would call a 'technical' basis. I first discussed IHS on this blog on March 24, 2007, when the stock was trading at $42.10.

What exactly does this company do?

According to the Yahoo "Profile" on IHS, the company

"...provides technical information, decision-support tools, and related services to customers in the energy, defense, aerospace, construction, electronics, and automotive industries worldwide. It operates in two segments: Energy and Engineering. The Energy segment develops and delivers oil and gas industry data on exploration, development, production, and transportation activities to energy producers and oil companies. It also provides decision-support tools and operational, research, and strategic advisory services to these customers, as well as to utilities and transportation, petrochemical, coal, and power companies. The Engineering segment provides solutions, such as technical specifications and standards, regulations, parts data, design guides, and other information to customers in its targeted industries. This segment serves defense, aerospace, construction, energy, electronics, and automotive industries. The company' customers range includes governments, multinational corporations, smaller companies, and technical professionals."

How did they do in the latest quarter?

On September 20, 2007, IHS reported 3rd quarter 2007 results.  Revenue for the quarter ended August 31, 2007, came in at $183.4 million, up 31% over the 3rd quarter 2006 results of $139.9 million.  Net income increased similarly to $21.7 million from $16.1 million and earnings grew 25% to $.35/share from $.28/diluted share last year.

How about longer-term results?

Examining the Morningstar.com "5-Yr Restated" financials on IHS, we can see the steady revenue growth from $339 million in 2002 to $551 million in 2006 and $639 million in the TTM.  Earnings have been a bit more erratic with results climbing to $1.11/share in 2004 before dipping to $.75/share in 2005, but resuming the climb to $.99/share in 2006 and $1.22/share in the TTM.  No dividends are paid.  Outstanding shares are stable with 69 million in 2003 increasing only slightly to 71 million in the TTM.

Free cash flow is positive and growing with $63 million in 2004 and $105 million in 2006 and $101 million in the TTM.

The balance sheet is just adequate with $132 million in cash and $221 million in other current assets compared to the current liabilities of $350.9 million. This works out to a current ratio of 1.01.  I would prefer to see companies with more current assets and ratios of at least 1.25.  There are $86.2 million in long-term liabilities as well.

What about some valuation numbers?

Looking at Yahoo "Key Statistics" on IHS, we can see that this company is a mid cap stock with a market capitalization of $4.02 billion.  The trailing p/e is rich at 52.28 with a forward p/e of 33.61 (fye 30-Nov-08).  According to Yahoo, the p/e is not justified in terms of anticipated growth as the PEG ratio (5 yr expected) comes in a bit rich at 1.90.

This richness in valuation is reflected as well, using Fidelity information, by the Price/Sales ratio which is 5.99 is well above the industry average of 2.40.   In terms of profitability, as measured by the Return on Equity (TTM) statistic, we find that IHS does a little better with a statistic of 11.38 vs. the industry average of 8.73%.

Yahoo reports 62.65 million shares outstanding with 58.13 million shares that float.  There are 2.02 million shares out short as of 11/9/07.  This is moderately significant as it totals 7 trading days of volume (the short ratio) to cover.  No stock dividends are reported on Yahoo and no cash dividends have been paid. 

What does the chart look like?

Examining the "point & figure" chart from StockCharts.com on IHS, we can see that this stock has steadily appreciated from November, 2005, when the stock was trading at $17 to a peak of $72/share in December, 2006.  The stock has pulled back somewhat but overall the sharp and steady ascent appears intact.

When would I sell these shares?

With a cost basis of $58.53, and not having sold any shares of this lot yet, I would sell all my shares should the stock decline to an 8% loss which works out to .92 x $58.53 = $53.85.  On the upside, my plan is to sell 1/7th of my shares or 20 shares at the 30% appreciation target.  This works out to 1.3 x $58.53 = $76.09.

Summary:  What do I think about IHS?

I like IHS and continue to own the stock.  That being said, I have concerned about the p/e in the 50's, a PEG over 1.5, and a price/sales ratio double the stock in its industry.  I do not see any analysts on this stock and don't know whether the latest quarter was above or below 'street' expectations.  The graph shows upward price momentum but appears to be a bit over-extended. In addition, the balance sheet shows relatively heavy current debt loads with a current ratio barely over 1.0. 

Thus,

IHS (IHS) IS RATED A HOLD 

Thanks again for stopping by and visiting.  If you have any comments or questions, please feel free to leave them on the blog or email me at bobsadviceforstocks@lycos.com.  If you get a chance, be sure and visit my Covestor Page, my SocialPicks Page, and my Podcast Website.

Have a great shortened week and wishing all of my friends a very Merry Christmas and a wonderful New Year!

Bob