Tuesday, August 15, 2017

Today we bring another sector update from our crack Calcbench research department, this time examining financial trends in the business services sector.

The report examines the financial data of more than 300 firms identifying as “business services, not elsewhere classified” according to SIC code 7389. That can be anything from payment services, to business agents or resellers, to our personal favorite, “filling pressure containers with hairspray, insecticide, etc.”

We looked at financial data this group reported from 2011 through 2016. The complete report is on our Research Page, and we have a few highlights below. Alas, we did not break out sub-categories for hairspray versus insecticide.

  • Revenue in the sector has been going in the right direction: up 32 percent, from $153 billion in 2011 to just more than $200 billion in 2016. Year-over-year revenue rose 5 percent from 2015 to 2016.
  • That said, nearly half of all revenue in the sector went to only five firms last year: Accenture, AliBaba, PayPal, Visa, and Mastercard. They racked up 46 percent of the total pie.
  • Net income rose 91 percent over the five-year period, but fell 0.33 percent from 2015 to 2016. Operating expenses rose 52 percent, 2011 to 2016, but cash rose 100 percent over the same period. (Yay, cash!)
  • Total capex spend rose 70 percent, 2011 to 2016; total R&D spend rose 127 percent. (OK, OK; we’ll look into R&D expenses for those hairspray container fillers in a separate report. That’s gotta be interesting.)

The report also looks at Days Sales Outstanding for various firms, ranking them on a bar chart scale. DSO is a useful metric for quality of customer credit, and can identify red flags for firms that might have too many customers promising for too long that the check is in the mail.

This sector report can be the starting point for additional company-specific research you want to do on companies you follow: get the sector trends here, then visit our Company in Detail page to see how your target company performs against sector norms. And as always, Calcbench can help subscribers with specific research requests; all you need to do is ask.

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