Despite a recent drop in oil prices, the stock of IHS
In the fiscal fourth-quarter results announced Thursday, IHS' revenues increased 18% to $148.1 million. The Energy segment led the way with a 26% increase to $79.8 million. Net income fell by $2.5 million to $13.9 million, or $0.24 per share. Keep in mind that there was a $4.1 million charge for the former CEO, who recently retired.
Despite the loss recorded on the income statement, cash flows from operations were $21.6 million -- almost doubling last year's fourth-quarter total. In all, the company has $182.1 million in the bank.
Sine the late 1950s, IHS has been building technical databases, which help a variety of industries like energy, defense, and construction. The databases leverage top technologies, such as those from Oracle
For example, its energy databases consist of huge amounts of information to help improve the odds for oil exploration. No doubt, as it gets tougher to find new sources of oil, such technology can be quite valuable.
What's more, IHS sells its information on a subscription basis. This allows for a more stable revenue source.
As for guidance, management lowered expectations for fiscal 2007. Instead of 13% organic growth in revenues, the result is likely to be about 10% to 12%. Then again, in light of some of the volatility in the energy markets, the company is likely getting a little more conservative with its forecasts.
But, the fact remains that -- because of a business with good leverage -- the company produces significant cash flows. In the past year, the amount was about $115.7 million.
This is certainly helpful for its M&A program, which is a key part of IHS's growth. For example, the company recently purchased Geological Data Services, a database provider of subsurface information in areas like the Permian Basin and the Rocky Mountains. That company spent 20 years building its database.
Essentially, this is the key to IHS: it takes many years to build quality databases. This is a great competitive advantage, and something customers are willing to pay for.
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