HotTopics: Financial Performance Scorecard, 3Q 2005, Hints Of Pressure On Margins

The companies in the Outsell 100 Company Monitor(SM) financial scorecard are seeing growth rates level off, and there are signs of pressure on margins. In the third quarter of 2005, the companies' combined growth rate was 10 percent, settling into a band of 9 percent-12 percent that Outsell expects it to occupy through 2006

- slightly higher than Outsell's forecast of 8.0 percent growth for the total information industry. Operating income (OI) is showing mixed trends, as the percentage of companies turning in operating income gains dropped to just 65 percent, the lowest since 2003

- a trend Outsell will continue to monitor. Search, Aggregation & Syndication (SAS) companies including Google and Yahoo! continue to dominate the growth rankings, with the Scientific, Technical & Medical (STM) companies and market research firms (both IT and non-IT) showing good gains. The lagging sectors are the Big Diverse companies and the News & Trade segment. Three of the four key benchmarks used to calculate the Outsell 100 ranks have slipped slightly: revenue growth, OI margin, and market cap ratio. Only the volatile cash to revenue ratio blipped upward slightly. McGraw-Hill, with its healthy Financial Services and Education divisions, alone qualifies as a 'rising star' this quarter; the 'sinking stones' are all news companies: Gannett, Tribune, the New York Times Co., Knight Ridder, and Dow Jones.