A long, long time ago (maybe 10 years) the data analytics industry was fairly easy to define and track. Back in that pre-historic era SAS was considered the gold standard of analytics companies with a comprehensive range of solutions addressing the demands of many industries. Given the relative paucity of data, analytics tended to focus on those industries that generated usable data. Companies that were part of the analytics universe back then would have included:
SAS is arguably still the leader of the pack today, but it is a more confusing landscape - more players, new solutions and different end users. Most importantly, the analytics field today has been driven by an explosion in data (the 4 V’s), the rise of e-commerce, the increasing importance of business users (citizen data scientists).
These forces have combined to give rise to a number of trends:
With all this activity and the indisputable rise of analytics as a distinct field, how are the winners (and the non-winners) faring on Wall Street? The first step in assessing this is to define the key segments of the data analytics universe - a somewhat subjective exercise! There is no generally accepted definition of data analytics as a discrete market sector. Wall Street tends to view companies at a fairly high level (software, business services) and even the industry analyst firms tend towards functional classifications (for example, Gartner analysts report on such areas as Digital Marketing Analytics, Data Science Platforms, Business Intelligence and Data Science Platform and more). For the purposes of this analysis I have categorized the field into four discrete segments and identified those public companies which are principally engaged in each segment.
I have ignored the performance of the industry gorillas - Microsoft, Oracle, SAP etc., with the exception of IBM, which generate the majority of their revenue and profit from their non-analytics mainstream businesses. I have included IBM, however, because of the size and scope (and publicized strategy) of their analytics businesses, even though it is difficult to identify how much those businesses contribute to consolidated results. I have also included the post-merger entity of Quintiles IMS which was formed last year to combine the data and technology business of IMS with the life sciences solutions of Quintiles. Given the size of the industry, the volume of data generated as well as the amount of political noise currently surrounding the industry, one would expect that the sector will generate significant analytics activity in the coming years.
In reviewing the stock price performance of each segment for the last 2 years or so (January 2015 through July 2017) companies have both under-performed and out-performed the broader market (S&P500). The winning stock price performers in each category are:
In looking at these leaders compared against each other, FICO emerges as the best performing stock of the four segments over the past 30 months or so and all categories, with the exception of the analytic software/BI segment, have outperformed the broader market. FICO is the smallest of these companies in terms of revenue (around $900 million) and primarily serves the financial sector whereas the other segment leaders all have a broader vertical footprint. Salesforce, on the other hand, has continued to grow impressively from a high base with current revenue at $8.4 billion. QuintilesIMS has performed well in the risk analytics segment and, given that it is still in the process of integrating the 2 entities, it may outperform in the next year or so. One possible conclusion is that those businesses with a concentration in a single industry with the right attributes (data intensive, regulated, complex) have tended to perform well relative to those businesses with a broader mission (although there are many exceptions to this theory).
