Topic: How To Invest

The financial world’s “need to know” makes these two good stocks to buy

good stocks to buy

Today, we look at two U.S. stocks that feed the never-ending hunger of banks and other financial firms for information. By carving out special niches with their respective services both of these firms have earned our recommendation as good stocks to buy.

These two U.S. companies are trading near their all-time highs. That’s partly because the improving economy is giving their main clients—banks and financial services firms— more to spend on their hard-to-replace services.

As well, both are tapping into the “big data” trend, helping businesses capture and analyze a lot of information about their operations. We like the long-term outlook for both of these stocks.

BROADRIDGE FINANCIAL SOLUTIONS INC. (New York symbol BR; serves the investment industry in three main areas: investor communications, securities processing and transaction clearing. It processes 90% of all proxy votes in the U.S. and Canada.

If you exclude one-time items, Broadridge earned $58.8 million, or $0.47 a share, in its fiscal 2015 third quarter, which ended March 31, 2015. That’s up 6.7% from $55.1 million, or $0.44 a share, a year earlier.

The company continues to attract new customers and is doing a good job of holding on to its existing ones. Revenue gained 4.6%, to $634.2 million from $606.3 million.

Broadridge typically makes about half of its profits in its fiscal fourth quarter, which ends June 30. That’s the busiest time for processing proxies and annual reports on behalf of its clients.

The company ended the quarter with cash of $310.1 million, or $2.60 a share. Its long-term debt of $629.3 million is a low 10% of its market cap. The stock is up 31% for us over the last year and now trades at 21.1 times the $2.47 a share Broadridge should earn for all of fiscal 2015.

That seems like a high multiple, but it’s still reasonable in light of the company’s dominant market share and growth prospects. The $1.08 dividend yields 2.1%.

Recommendation in Wall Street Stock Forecaster: BUY. 

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Good stocks to buy: Increased demand from small businesses prompts Dun & Bradstreet to re-acquire DBCC

DUN & BRADSTREET CORP. (New York symbol DNB; provides credit reports on over 230 million companies. Its clients use this information to make lending and buying decisions.

Dun & Bradstreet gets 64% of its revenue from credit reports. The remaining 36% comes from other information products, like software businesses use to manage websites and customer data.

In 2010, the company sold subsidiary Dun & Bradstreet Credibility Corp. (DBCC) to private investors for $10.0 million. DBCC sells credit reports and related services to U.S. small businesses; it pays licensing fees to use the Dun & Bradstreet brand.

DBCC’s buyers developed a number of new products, helping the company double its annual revenue to $135 million.

In May 2015, Dun & Bradstreet agreed to buy back DBCC for $320 million. Small businesses are now spending more on marketing and data products following the 2008-2009 recession, and DBCC’s expertise will let Dun & Bradstreet profit from this trend.

To help pay for this purchase, the company is selling its operations in Australia and New Zealand for $170.0 million. Like DBCC’s former owners, the buyers of this business will use the Dun & Bradstreet brand and databases under a licensing agreement.

Meanwhile, Dun & Bradstreet earned $48.4 million in the three months ended March 31, 2015, down 16.8% from $58.2 million a year earlier. Per-share profits fell 14.2%, to $1.33 from $1.55, on fewer shares outstanding. These figures exclude several unusual items, such as writedowns and charges related to the company’s ongoing cost-cutting program.

Revenue slipped 1.3%, to $376.8 million from $381.8 million. Revenue from the Americas (75% of the total) was flat, but international sales (25%) declined 4.6%. If you exclude the negative impact of currency exchange rates, overall revenue rose 1%.

Dun & Bradstreet is shifting its data and software services to a cloud platform, which is something the company can easily afford to do: as of March 31, 2015, it held cash of $355.2 million, or $9.89 a share. Its long-term debt of $1.4 billion is a manageable 30% of its market cap.

The company should earn $7.50 a share in 2015, and the stock trades at a reasonable 17.1 times that estimate. The $1.85 dividend yields 1.4%.

Recommendation in Wall Street Stock Forecaster: BUY. 


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