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1. Company Snapshot

1.a. Company Description

Information Services Group, Inc., together with its subsidiaries, operates as a technology research and advisory company in the Americas, Europe, and the Asia Pacific.The company offers digital transformation services, including automation, cloud, and data analytics; sourcing advisory; managed governance and risk; network carrier; technology strategy and operations design; change management; and market intelligence and technology research and analysis services.It supports private and public sector organizations to transform and optimize their operational environments.


The company also provides ISG Digital, a client solution platform that helps clients developing technology, transformation, sourcing, and digital solutions; and ISG Enterprise, a client solution platform that helps clients manage change and optimize operations in areas comprising finance, human resource, and Procure2Pay.In addition, it offers ISG GovernX, a software platform, which provides insights from market and performance data, and automates the management of third-party supplier relationships that comprise contract and project lifecycles, and risk management.The company serves private sector clients operating in the manufacturing, banking and financial services, insurance, health sciences, energy and utilities, and consumer services industries; and public sector clients, including state and local governments, airport and transit authorities, and national and provincial government units.


Information Services Group, Inc.was founded in 2006 and is based in Stamford, Connecticut.

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1.b. Last Insights on III

Information Services Group, Inc.'s recent performance was driven by robust growth in recurring revenue and expanding AI advisory services. The company's AI-related revenue doubled to 20% in Q2, fueled by platforms like Tango and GovernX, which enhance client stickiness and multi-year contracts. A healthy balance sheet supports buybacks, dividends, and M&A, with rising margins and strong free cash flow. According to UBS, the company's growth trends are improving, and Deutsche Bank finds its investment story compelling.

1.c. Company Highlights

2. ISG's Q3 Results Exceed Expectations, Driven by AI Demand

ISG reported revenues of $62.4 million, up 8% year-over-year, excluding the divested automation unit. Adjusted EBITDA was $8.4 million, up 19%, resulting in an EBITDA margin of 13.5%, a 200 basis point increase. EPS came in at $0.06059, below estimates of $0.08. Recurring revenues, a key component of ISG's success, grew 9% to $28 million, representing 45% of overall revenue. The company's AI-related revenue was $20 million, four times the amount reported in the same quarter last year.

Publication Date: Nov -04

📋 Highlights

Regional Performance

The Americas region led growth, with revenues up 11% to $42.2 million. Europe saw revenues increase 7% to $16 million, while Asia Pacific revenues declined 15% to $4.2 million due to delayed client decisions. Management noted that the pipeline in Europe is strong, with clients accelerating cost optimization efforts, and expects growth to pick up in the region.

AI-Driven Growth

ISG's AI-centered approach continues to drive growth, with AI-related revenue increasing to $20 million. The company has supported 350 clients with AI-related advisory and research services year-to-date, up over 200% from the same period last year. Management expects AI demand to continue, driven by clients seeking to optimize costs and risks.

Outlook and Valuation

ISG expects to continue expanding its EBITDA margin, driven by its improved mix of higher-margin platforms and disciplined operating approach. Analysts estimate revenue growth of 4.8% next year. With a P/E Ratio of 37.28 and EV/EBITDA of 14.72, the market appears to be pricing in significant growth expectations. The company's ROE of 8.23% and ROIC of 4.84% indicate a relatively efficient use of capital. As ISG continues to execute on its AI-driven strategy, investors will be watching to see if the company can meet or exceed growth expectations.

3. NewsRoom

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ISG to Study Duck Creek Ecosystem Service Providers

Dec -04

Source: businesswire.com

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ISG to Evaluate Snowflake Ecosystem Partners

Dec -02

Source: businesswire.com

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European Enterprises Strive for AI Innovation and Compliance, ISG Says

Dec -02

Source: businesswire.com

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Imperial Provides Huckleberry Exploration Update

Nov -27

Source:

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ISG to Study Databricks Ecosystem Service Providers

Nov -25

Source: businesswire.com

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Companies Prioritize Revenue Performance with AI, ISG Says

Nov -25

Source: businesswire.com

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ISG to Study Salesforce Ecosystem Partners

Nov -24

Source: businesswire.com

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Compensation Management Software Evolves with AI and Analytics to Drive Workforce Strategies, ISG Says

Nov -21

Source: businesswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (3.00%)

6. Segments

Fact-based Sourcing Advisory Services

Expected Growth: 3.0%

The 3.0% growth of Fact-based Sourcing Advisory Services from Information Services Group, Inc. is driven by increasing demand for data-driven procurement decisions, rising adoption of digital transformation initiatives, and growing need for cost optimization and operational efficiency among enterprises.

7. Detailed Products

ISG GovernX

A governance platform that enables clients to manage their third-party relationships, contracts, and risk management

ISG Provider Lens

A research platform that provides insights and analysis on the global IT and business services market

ISG Index

A quarterly report that provides insights into the global IT and business services market

ISG Consulting Services

A consulting practice that provides advisory services to enterprises on IT and business services strategies

ISG Sourcing Advisory Services

A sourcing advisory practice that helps enterprises develop and implement effective sourcing strategies

ISG Digital Strategy Services

A digital strategy practice that helps enterprises develop and implement effective digital transformation strategies

8. Information Services Group, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Information Services Group, Inc. is medium because while there are some substitutes available, they are not highly attractive to customers.

Bargaining Power Of Customers

The bargaining power of customers for Information Services Group, Inc. is low because the company has a diverse customer base and no single customer accounts for a significant portion of its revenue.

Bargaining Power Of Suppliers

The bargaining power of suppliers for Information Services Group, Inc. is medium because while the company relies on a few key suppliers, it also has some bargaining power due to its size and reputation.

Threat Of New Entrants

The threat of new entrants for Information Services Group, Inc. is high because the industry is highly competitive and there are low barriers to entry.

Intensity Of Rivalry

The intensity of rivalry for Information Services Group, Inc. is high because the industry is highly competitive and there are many established players.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 44.51%
Debt Cost 8.97%
Equity Weight 55.49%
Equity Cost 8.97%
WACC 8.97%
Leverage 80.21%

11. Quality Control: Information Services Group, Inc. passed 2 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
ISG

A-Score: 5.6/10

Value: 4.5

Growth: 2.7

Quality: 5.5

Yield: 6.0

Momentum: 9.5

Volatility: 5.7

1-Year Total Return ->

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Stock-Card
TaskUs

A-Score: 5.3/10

Value: 5.1

Growth: 8.2

Quality: 5.5

Yield: 0.0

Momentum: 8.0

Volatility: 4.7

1-Year Total Return ->

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Stock-Card
Usio

A-Score: 4.0/10

Value: 6.2

Growth: 4.7

Quality: 5.8

Yield: 0.0

Momentum: 5.0

Volatility: 2.3

1-Year Total Return ->

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Stock-Card
CSP

A-Score: 3.6/10

Value: 7.6

Growth: 2.8

Quality: 4.2

Yield: 1.0

Momentum: 4.0

Volatility: 2.0

1-Year Total Return ->

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Stock-Card
Unisys

A-Score: 3.5/10

Value: 9.8

Growth: 2.2

Quality: 4.8

Yield: 0.0

Momentum: 1.0

Volatility: 3.0

1-Year Total Return ->

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Stock-Card
TTEC

A-Score: 2.6/10

Value: 8.1

Growth: 1.3

Quality: 2.2

Yield: 2.0

Momentum: 1.0

Volatility: 1.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

5.97$

Current Price

5.97$

Potential

-0.00%

Expected Cash-Flows