RiskMetrics: The Buy Case In A Nutshell

Today, analysts at Bank of America Merrill Lynch have maintain their “Buy” rating on RiskMetrics Group, Inc. (NYSE: RMG) with a 12-month price target of $18.

The firm highlights the following key points supporting their Buy thesis
1) Key metrics represents a near-term catalyst (supported by improved capital markets and fund performance)

2) Opportunities from potential global regulatory actions in financial services

3) Largest MAC solutions vendor 4) Compelling valuation – strong FCF with shares trading at a discount to peer group.

The firm added “Shares of RiskMetrics underperformed the overall market in 2009, with the stock up 3% YTD relative to an increase of 22% in the S&P 500. We attribute the underperformance to a decline in organic revenue growth, primarily reflecting declines in retention (largely due to hedge fund closures) and lower new sales growth. Given the revenue recognition “lag” associated with subscription based models (90%+ of RMG’s revenue is subscription based), we expect growth to remain challenged through 1H10, before reaccelerating over 2H10.”

Today, RMG is down 0.07% to $15.32.