Is IMS Health a Good Investment?

Below is our investment analysis for IMS Health (RX).

Executive Summary

• Attractive and sustainable return on invested capital
• Exceeded 100% over the past ten years
• High customer switching costs should help sustain returns on invested capital over a long time period
• Management team focused on delivering value to shareholders
• CEO has meaningful equity ownership in t he company
• The company has consistently delivered excess cash flow back to shareholders through dividends, stock buybacks, and paying down debt
• Attractive valuation
• Current stock price implies an 18% normalized free cash flow yield
• Market is mistaking the impact from the recession with a long-term secular decline in the company’s free cash flow

Is IMS Health a Good Company?

The IMS Health, Inc. (“IMS”, “RX”, or the “company”) provides mission critical information to pharmaceutical companies globally, such as sales territory reporting and prescription tracking.