Why ISC is a Contrarian Winner in a Volatile Market: A Defensible Cash Flow Machine with Catalysts Ahead

The current market environment is rife with uncertainty, but one company stands out as a rare "defensive growth" play: Information Services Corporation (ISC). With its Saskatchewan land registry monopoly generating inflation-protected cash flows until 2053, a proven track record of M&A-driven value creation, and a decisive rebuke of activist pressure, ISC presents a compelling long-term opportunity for investors seeking stability amid volatility. Let’s dissect why this overlooked compounder could be the portfolio’s quiet hero for the next decade.

The Anchor: A 30-Year CPI-Linked Cash Flow Machine

ISC’s crown jewel is its exclusive 30-year contract with the Government of Saskatchewan for managing the province’s land registry system. This deal, now extended to 2053, delivers semi-annual CPI-linked cash flows that grow in tandem with inflation—ensuring predictable revenue streams even in high-inflation environments.

The original $180 million contract has already swelled to $230 million due to inflation adjustments, with payments escalating as Canada’s CPI rises. Crucially, these cash flows are contractual obligations backed by a government entity, making them among the safest in the public markets.

The longevity and defensiveness of this cash flow engine are unmatched. While peers face earnings volatility, ISC’s Saskatchewan monopoly provides a “sleep-at-night” base of revenue growth. As Shawn Peters, ISC’s CEO, noted in recent remarks, “This is a partnership for the next generation.”

The Growth Engine: A 13.6% CAGR FCF Machine via M&A

While the registry business ensures stability, ISC’s Services segment has been the true growth driver, generating over $100 million in free cash flow since 2015 with a 13.6% compound annual growth rate. This performance stems from a disciplined M&A strategy focused on adjacent service verticals, such as corporate registry management and property tax solutions.

The company has consistently identified undervalued targets, integrated them into its platform, and leveraged its scale to drive synergies. For example, its acquisition of a regional property tax software provider in 2020 expanded its service footprint while boosting margins.

This track record is critical because it demonstrates management’s ability to allocate capital effectively—something activist investors like Plantro have failed to grasp.

The Contrarian Catalyst: Rebuffing Undervalued Activism

In early 2024, activist investor Plantro Capital launched a mini-tender offer for ISC shares at CAD $15.50—a 20% discount to the stock’s then-current price. ISC’s board swiftly rejected the offer, citing its “fundamental undervaluation of the company’s strategic assets and growth trajectory.”

This rejection was a masterstroke. It sent a clear message: management knows the value of its assets better than outsiders. The stock’s subsequent rebound to a 52-week high of CAD $22 validates this stance.

Investors should note that Plantro’s approach—pushing for short-term gains through asset sales—directly conflicts with ISC’s long-term strategy. Selling core assets would erode the defensible cash flows powering its growth. The board’s refusal underscores their alignment with shareholders seeking sustained value creation.

Why Buy Now? A Discounted Compounder with 2053 Catalysts

Today, ISC trades at a 14.8x EV/EBITDA multiple, below its five-year average of 16.2x and well below software peers at 22x+. This discount ignores two critical facts:

1. The 2053 cash flow tailwind: The Saskatchewan registry’s final payment isn’t due until 2053, but the bulk of its value is delivered in the next decade—a period where inflation is likely to remain elevated.
2. Execution risk reduction: With the MSA extension now locked in and activist pressure repelled, management can focus squarely on executing its proven model.

The stock’s 209% total return since 2013 versus the S&P TSX SmallCap’s 87% highlights its superiority. Yet the market still underappreciates the compounding power of its dual engines: defensive cash flows and high-return M&A.

Final Take: Buy the Dip, Own the Defensiveness

ISC is a contrarian’s dream: a stable cash flow machine with a growth engine, trading at a discount despite its fortress balance sheet and shareholder-friendly track record. With activist pressure fading and its core contract now extended to 2053, this is the time to position for the next wave of value creation.

The risks? Limited. The Saskatchewan deal is too large to unwind, and the M&A playbook has been stress-tested over decades. For investors willing to look past short-term noise, ISC offers a rare combination of low volatility, high growth, and catalyst-rich upside.

Action to take: Use dips below CAD $20 to accumulate shares of ISC. This is a generational play on a structural monopoly and a management team that’s outexecuted activists at every turn.

DISCLAIMER: This article is for informational purposes only. Please consult your financial advisor before making investment decisions.