Clarivate PLC: Data Stock Up 75% in 2020; More to Come

Clarivate stockClarivate Stock Could Be the Next Big Data Play

The key for companies when they first start out or expand is the demand for critical information and insights. Poor data and analysis will generally lead to poor returns.

That’s where London, U.K.-based Clarivate PLC (NYSE:CCC) comes in. The company offers a platform comprising critical and highly respected information and analytic insights used by companies to accelerate and effectively innovate. Clarivate serves clients in more than 40 countries.

CCC stock plummeted to $15.00 during the March sell-off, before staging an impressive rally to a record high of $33.55 in August.

But while Clarivate stock is up 75% this year, I consider the prospects and growth potential supportive for higher moves.

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On the chart, CCC stock broke out of a consolidation channel around $24.00, where the stock is currently holding.

Renewed relative strength could propel Clarivate stock back toward its high. Another breakout could see the stock move toward $40.00.

Chart courtesy of StockCharts.com

Big Revenue Growth Ahead Bodes Well for CCC Stock

A look at Clarivate PLC’s three years of reported revenue history shows annual growth, albeit not indicative of a growth stock.

Fiscal Year Revenue (Millions) Growth
2017 $917.6 N/A
2018 $968.5 5.5%
2019 $974.4 0.6%

(Source: “Clarivate,” MarketWatch, last accessed December 17, 2020.)

But the outlook looks extremely promising. Clarivate is expected to report revenues of $1.3 billion for fiscal 2020, up 30.7% compared to 2019, and follow that with impressive 41.5% growth to $1.8 billion in 2021. (Source: “Clarivate Plc (CCC),” Yahoo! Finance, last accessed December 17, 2020.)

Gross margins expanded to 64.4% in 2019, versus 57% and 59.1% in 2017 and 2019, respectively.

Moreover, Clarivate PLC achieved record-high earnings before interest, taxes, depreciation, and amortization (EBITDA) in 2019. Its EBITDA growth in 2018 and 2019 was far higher than the comparative rate of revenue growth.

Fiscal Year EBITDA (Millions) Growth
2017 $162.6 N/A
2018 $188.9 16.2%
2019 $207.8 10.0%

(Source: MarketWatch, op. cit.)

On a generally accepted accounting principles (GAAP) basis, Clarivate has reported earnings-per-share (EPS) losses, but adjusting for unusual items, the company has been turning profits.

Fiscal Year GAAP Diluted EPS Growth
2017 -$0.86 N/A
2018 -$0.79 8.3%
2019 -$0.77 2.9%

(Source: MarketWatch, op. cit.)

On an adjusted basis, Clarivate PLC reported profits of $0.53 per diluted share in 2019. Analysts estimate that this will slightly rise to $0.58 per diluted share this year, and further increase to $0.77 per diluted share in 2021. (Source: Yahoo! Finance, op. cit.)

Meanwhile, the company reported positive free cash flow (FCF) in 2019. Look for its FCF to remain positive in 2020, driven by the strong revenues and cost control.

Fiscal Year FCF (Millions) Growth
2017 -$31.1 N/A
2018 -$71.5 -129.7%
2019 $59.0 182.5%

(Source: MarketWatch, op. cit.)

Analyst Take

Institutional investors are widely invested in Clarivate stock. About 240 institutions hold 79% of the outstanding shares. (Source: Yahoo! Finance, op. cit.)

While the COVID-19 pandemic has battered many companies, Clarivate PLC appears to have escaped the brunt of the impact. Once the company delivers stronger profitability, CCC stock will likely ratchet higher.