Along with TNE , I have been following IRI for a number of...

Along with TNE [*], I have been following IRI for a number of years, waiting for the moment that the company "mis-stepped" in the eyes of the market.

Well, that mis-step has finally happened, with the company having guided to just modest growth of <5% for FY2018 result (and given the first half was up 20% on pcp, it means that the second half will probably be down some 7% on pcp [Note: second-half is seasonally the stronger period]).

However, I am sure that there is nothing fundamentally broken in the business; rather, the muted FY2018 outcome is a function of timing, with some second-half sales for JH2018 having slipped into the FY2019 year.

For that reason, I believe that FY2019 will be a catch-up year, with earnings growth above 15%.

That will leave the stock trading on a P/E multiple of around 19x and an EV/EBITDA multiple of 14x, which I think are quite reasonable for a business of IRI's calibre and financial pedigree.

In the light of that, I have started buying IRI, with the caveat that the upcoming result might cause some residual sticker shock for the market, which one needs to design around when it comes to building an appropriate portfolio position.

The investment thesis for IRI is not overly complex; it is a globally scale-able business with sticky customer base due to the mission-critical nature of IRI's product and service offerings, and is growing is earnings at a rate of between 10%pa and 15%pa, supported by

So, assuming IRI's valuation ratings hold steady - which, unless the business model undergoes some major deviation from the path it has taken over the past 10 years, they should do - the share price will appreciate by between 10% and 15%pa. Plus I'll be getting a 3%pa dividend top up.

That's better than a poke in the eye with a blunt stick.


[*]  TNE is a business that I would love to own, but it's nose-bleed type valuation has precluded me from doing so to date
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