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Gartner: An Established Moat and Growing Fast

Gartner is the market leader in IT advisory and benchmarking services

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Apr 15, 2022
  • Gartner beat Wall Street's expectations for fiscal 2021.
  • Net income has seen meteoric growth of 198% year-over-year, reaching $793 million.
  • Legendary value investor Joel Greenblatt was buying shares in Q4 2021.
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Gartner Inc. (

IT, Financial) is the market leader in information technology (IT, Financial) advisory and benchmarking services. The company is most well-known for their 100+ "magic quadrants," which enterprises use to benchmark and add credibility to their technology. However, the company has much more to offer to shareholders.

According to their most recent earnings report for the fourth quarter of fiscal 2021, the company beat Wall street's expectations and has seen their return on equity surpass 100%. Since April 2021, the share price is up a staggering 181% as more companies are going digital and require advice in this area. Let's dive into the business model, financials and valuation to see why I am bullish on this stock.


Business model

Gartner has two operating segments. The first is Global Technology Sales (GTS), which makes up 80% of the company's contract value and equated to $3.4 billion for fiscal 2021. This is Gartner's “bread & butter” and they boast over 14,000 enterprises as customers and a network of over 3,000 salespeople.


Source: Gartner investor materials

The second part of Gartner's business is Global Business Sales (GBS), which makes up 20% of contract value, or $874 million. The GBS side of the business covers everything from supply chain to marketing, finance and legal. Thus, I see this as an area Gartner can grow sales in substantially with a “land and expand” strategy.

In terms of revenue split by business type, the company makes 80% of their revenue from research, 8% from consulting and 4% from conferences. In addition, 91% of Garnter's revenue is from subscription services, which is a great recurring revenue business model. Region-wise, 64% of the company’s sales are from the U.S. and Canada, but they also have a strong presence in the Europe, Middle East and Africa region (24% of sales)


Source: Gartner investor materials

Growing financials

Gartner has grown their revenues from $4.1 billion in fiscal 2020 to $4.7 billion in fiscal 2021, which is an increase of 14%. However, the net income has seen meteoric growth of 198%, jumping from $266 million to $793 million.


Gartner bought back approximately $1.7 billion in stock during 2021, which has reduced their net share count by 7%. The buybacks are one of the main reasons the company has seen a boost in per-share income, as reducing the equity balance generates a staggering 214% return on equity.

On the balance sheet, Gartner has $764 million in cash and just $5 million in short-term debt. Their long-term debt is fairly large at $2.45, billion but with strong growing net income, this doesn’t seem a major issue in my view.


In terms of valuation, the GF Value line states the stock as significantly overvalued based on past returns, past earnings multiples and analysts' estimates of future business performance.


However, one of the legendary value investor that I follow,

Joel Greenblatt (Trades, Portfolio), was buying shares in the fourth quarter of 2021, during which shares traded for an average price of $321 - that's approximately 10% above the current price. Overall, more gurus were selling the stock than buying it recently, though, which is a negative sign.


Gartner is a fantastic company and a true leader when it comes to IT services. Their in-depth relationships with large enterprises give them a competitive advantage and help to retain existing customers. Thanks to buybacks and rising profits, shareholders have had a major boost, and I expect more of this to continue. However, at the moment the stock seems to be priced a little high for me, thus it is on my watch list.

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I/we have no positions in any stocks mentioned, and have no plans to buy any new positions in the stocks mentioned within the next 72 hours. Click for the complete disclosure
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