RELX (REL) £28.83

Market cap: £53.9 billion

Shares in information provider and data analytics specialist RELX (REL) rarely look cheap and today is no exception. However, this is a really excellent business, whose track record stands up over the long term and which is well positioned to adapt to and benefit from developments like the growth of AI (artificial intelligence).

The stock has enjoyed a strong run and based on consensus forecasts trades on 23 times 2024 earnings. However, we think this is more than justified by the quality on offer and think investors are likely to enjoy big rewards for backing the company over the long run. RELX, in our view, is an underappreciated AI winner.

RELX operates across four main segments: risk, legal, exhibitions and scientific, technical and medical (STM). The company provides information-based analytics and decision tools for professional and business customers to help them make better decisions, get better results and be more productive. AI is likely to speed up some of these processes and potentially allow RELX to analyse more datasets, more quickly.

Evidence of the rude health the company is in was provided by results for the first nine months of 2023. Segments which did particularly well were RELX’s exhibitions division which reported a 32% underlying revenue growth year-to-date – ahead of pre-pandemic levels – ‘with increased exhibitor usage of a growing range of digital tools’, and RELX’s legal division.

The company expects ‘another year of strong underlying revenue growth, in line with historical trends’.

RELX continues to develop and incorporate content, higher value-add analytics, decision tools and generative AI across all its segments.

‘RELX is a splendid example of a high-quality, structurally growing and resilient business and [RELX] has been at the forefront for deploying AI, well before it became part of the market zeitgeist.

‘We believe the business can sustain this growth over the medium term at least, and perhaps well beyond,’ said STS Global Income & Growth Trust (STS) in recent commentary on the business.

RELX observes that its products often account for less than 1% of its customers‘ total cost base but can have a significant and positive impact on the economics of the remaining 99%. In other words what RELX charges its customers is a very small proportion of what they spend but is also really significant to how they do business which helps make revenue streams sticky. 

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