June 15, 2009 - Interactive Data Corporation (IDC-NYSE) provides financial market data, analytics, and related services to financial institutions, active traders, and individual investors worldwide. The company's offerings enable customers to support their portfolio management and valuation, research and analysis, trading, sales and marketing, and client service activities.

The Active Trader Services segment involves eSignal business, which provides active traders, individual investors, and investment community professionals with real-time financial market information and access to decision-support tools to assist in their analysis of securities traded on various markets. This segment primarily targets active traders, individual investors, and investment community professionals.

Interactive Data Corporation markets and licenses its services either by direct subscriptions or through third-party business alliances. The company was founded in 1992 and is headquartered in Bedford, Massachusetts. Interactive Data Corporation is a subsidiary of Pearson plc, a large English publishing firm.

IDC caught my eye because I read this morning that Schwab reported an increase in trading volume by its client base of 22%. If individual investors are getting back into the market, then IDC is going to see some additional sales in the near future.

Not that it isn't already showing increased revenues. In fact, sales climbed by an average of 11% a year over the last 5 years. In 2006, they were $612.4 million. Last year, they were $750.5 million. This year, analysts (2 of them) forecast $764.11 million, then $807.87 million next year.

Earnings, on the other hand, may show a slight dip this year. Over the last 5 years, they gained an average of 21% a year. In 2006, they were 98 cents a share, then went to $1.30, followed by $1.48. This year, analysts see $1.40. Next year, they should set a new record of $1.50. Earnings for the second quarter should be 34 cents a share compared to 35 cents last year in the same period. For the third quarter, expect 36 cents a share compared to 38 cents last year. For the next 5 years, analysts predict earnings growth to average 10% a year.

You'd expect lower revenues from a stock market that's been in such turmoil over the last year. One of the reasons IDC has been able to grow theirs is due to an increased focus on fixed-income (bonds) trading. It's bought fixed-income valuation software recently and that's been contributing, offsetting some of the cancellations from the consolidation of companies in the banking business. Orders for IDC's PlusBook which evaluates bonds have grown even as many clients are cancelling purchases of terminals.

IDC's offerings for individuals haven't been faring as well. With large losses suffered by most traders and investors, its eSignal subscriptions have suffered. But if the equity market starts to show signs of life, these active clients will come back for the robust programs that eSignal provides.

The company bought a number of smaller companies over the last few years, it doesn't appear to be anxious to use any of its 1/4 of a billion dollars cash treasure on pursuing any larger fare. Management announced its game plan: stay conservative and buy only smaller technologies that will further enhance IDC's present product portfolio. Once the stock market shows real activity, expect that strategy to change, and the company become more aggressive in order to expand its market share.

More numbers: Market Cap is $2.21 billion. Forward P/E is 15.14. Price to Book is 2.22. Operating margin is a notable 28% while Profit margin is also remarkable at 18.85% (for the last 12 months). Total cash is $244 million, making $2.60 per share in cash. There is no debt. Current ratio is 2.7. Book Value per share is $10.60. There are 94.05 million shares outstanding but only 35.81 million shares in the float. Insiders own 61.77% of the stock. Institutions have 36.5%. There's an annual dividend of 80 cents a share for a yield of 3.3%.

Like most other stocks, IDC suffered a setback last year in the October/November crash, bottoming at $17.50 a share. It's recovered and seems to be headed higher. With a good revenue stream (most customers sign up for years) and new products that supplement its stock market portfolio of programs, the company is positioned to continue to prosper. However, investors like this stock and some of the valuations are rather high, especially for the slower earnings growth projected for the next 5 years. Those projections could easily be increased if the stock market begins to bring back investors now sitting on the sidelines. Then the stock breaking its old all-time high of $33.70, achieved in 2007, is very plausible.

Company Web site: www.interactivedatacorp.com

- Ted Allrich