I think I’ve found a growth stock that is full of future potential. What I like about this company is that it’s operating at the cutting edge of data science. It’s a leader in products that help a range of industries in advanced analysis, including law, healthcare, and research.
A technology innovator
Innovation is always one of the leading attributes I look for when investing in a business. The reason is that with unique product offerings, a company is much more likely to remain competitive. That’s even more true if the talent within the organisation has a track record of continuing to make ingenious inventions over long periods of time.
RELX (LSE:REL) invests roughly $1.7bn in technology every year. This goes toward machine learning, artificial intelligence, and large language models. It’s able to process over 40 petabytes of data. To put that into perspective, it’s the equivalent of 800m four-drawer filing cabinets filled with text.
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I’ve broken down its operations into four easy-to-understand steps:
- It has access to 40 petabytes of data content
- It uses big data platforms to organise this
- It designs analysis applications
- It gives customers a point of access to specific information and analysis
Rewards always come with risks
Can you believe the firm had its IPO in 1948? I wouldn’t have thought that considering how advanced it is in technology. However, it just goes to show how adaptable the company has been over the course of its life so far.
I think its success in staying current and relevant is quite evident in the long-term performance of its share price:
However, it’s not all roses. The company’s balance sheet could undeniably be better. It includes a significant amount of debt, and overall its total equity is much lower than its total liabilities. That can make the company vulnerable.
One of the reasons is that it has less room to issue debt to fund future growth projects, as it’s already quite burdened. So, other competitors might be able to get the upper hand. I think this is especially true right now when a lot of very talented and smart people are going to be collaborating to create groundbreaking artificial intelligence applications.
It’s also a conference organiser
One other compelling element that I’ve noticed about this business is that it offers conferences and exhibitions. This includes Big Data London, and now Data Universe, which is launching in New York in 2024. This acts as a clever way for RELX to acquire new customers, retain the ones it already has, and all around boost its brand.
To buy or not to buy?
I have to say, I’m impressed. However, it seems that the wider stock market is also quite confident in RELX shares. That’s indicated by the fact that the investment has a price-to-earnings ratio of around 35. That’s high for its industry, and it’s also high compared to how it has been valued historically.
I believe this company is excellent. However, it comes with a set of risks related to massive market changes that are currently underway, a weaker balance sheet than I’d like, and a daunting valuation.
So, I’ve got my eye on it, but it’s not the kind of investment I’m going to make in a hurry.
