Information Services Group, Inc.: Outlook Extremely Bullish Following Record Q1

Information Services Group Stock Up 25% Year-Over-Year

The S&P 500 is no longer in bear-market territory, but it’s still down by 15% from its recent highs. Moreover, plenty of tech companies continue to report underwhelming financial results.

This situation makes overlooked Information Services Group, Inc. (NASDAQ:III) very interesting. The company reported record full-year 2021 results (revenue, clients, adjusted earnings, operating income, adjusted net income, adjusted earnings, and cash), and that momentum carried into the first quarter of 2022.

Information Services Group also recently hiked its quarterly dividend by 33%. There haven’t been many tech companies doing something like that recently.

Not surprisingly, investors have been rewarding III stock for Information Services Group, Inc.’s strong performance. In mid-June, Information Services Group stock bounced off tested support near $5.45 and rallied by an impressive 35%.

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III stock’s been trouncing the market in general. As of this writing, Information Services Group stock is up by :

  • 13% over the last month
  • 18% over the last three months
  • 20% over the last six months
  • 25% year-over-year

Chart courtesy of StockCharts.com

About Information Services Group, Inc.

For Information Services Group, Inc., knowledge is power. The company is a global tech research and advisory firm that specializes in digital transformation services. The company helps organizations interpret their data, make better decisions, and make more money!

Information Services Group provides automation, cloud, and data analytics; sourcing advisories; managed governance and risk services; network carrier services; strategy and operations design; change management; market intelligence and technology research and analysis. (Source: “Corporate Profile,” Information Services Group, Inc.,” last accessed August 1, 2022.)

The company generates the majority of its revenue (66%) from its advisory services, with 34% coming from recurring revenues.

Information Services Group, Inc. is good at what it does. The company’s 850+ blue-chip clients include more than 75 of the world’s top 100 enterprises. Those clients include:

  • 15 of the top 15 global media and telecommunication companies
  • 14 of the top 15 global pharmaceutical and health services companies
  • 12 of the top 15 banking and financial institutions
  • 12 of the top 15 global manufacturing companies
  • 11 of the top 15 global insurance companies
  • Nine of the top 15 global consumer product and service companies and retailers

Record Q1 Revenue, Net Income, & Earnings Per Share

For the first quarter ended March 31, Information Services Group, Inc. announced that its revenue increased by nine percent year-over-year to a record $72.6 million, exceeding the high end of guidance. (Source: “Information Services Group Announces First-Quarter 2022 Results and Increases Dividend by 33%,” Information Services Group, Inc., May 9, 2022.)

The company reported first-quarter 2022 operating income of $7.7 million, up by 54% from $5.0 million in the first quarter of 2021. It also announced that its net income climbed by 44% year-over-year to a record $7.7 million, while its earnings per share went up by 42% to a record $0.10.

Information Services Group, Inc.’s adjusted net income in the first quarter rallied by 16% year-over-year to $6.4 million, or $0.12 per share. Its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) jumped by 23% to a record $10.6 million.

During the first quarter of 2022, Information Services Group, Inc. repurchased $5.5 million of its own shares and paid down $1.1 million of its debt. As of March 31, the company had $73.4 million in debt outstanding. Since 2019, the company’s high cash flow generation has allowed it to reduce its debt load by 15.6%.

Information Services Group, Inc. Raises Quarterly Payout

In addition to reporting another quarter of record results, Information Services Group, Inc.’s board approved a 33% hike to III stock’s quarterly dividend from $0.03 to $0.04 per share, for a yield of 2.2%.

The company could certainly raise its dividend again, since its payout ratio is just 36.3%.

Business Outlook

For the second quarter of 2022, Information Services Group, Inc. expects to report revenue between $73.0 and $75.0 million (up from record Q1 2021 revenue of $71.0 million) and adjusted EBITDA between $10.0 and $11.0 million (compared to $10.0 million last year).

Wall Street analysts are looking for Information Services Group to report second-quarter earnings of $0.10 per share, up from $0.08 in Q2 2021. There’s a good chance the company will top those projections.

For each of the last four quarters, Information Services Group, Inc. has reported earnings per share (EPS) above the consensus estimates.

PeriodActual EPSEPS EstimateRevenue (Millions)
Q1 2022$0.12$0.08$73.0
Q4 2021$0.10$0.08$70.0
Q3 2021$0.12$0.08$71.0
Q2 2021$0.12$0.07$71.0

Analyst Take

Information Services Group stock is an under-the-radar tech stock that has been quietly trouncing the broader market.

Information Services Group, Inc. reported record 2021 results and began 2022 in record fashion, delivering its highest quarterly revenue ever—along with record profitability—in the first quarter.

Management forecasts that this momentum will continue, and they raised III stock’s quarterly dividend by 33%.