Across the FTSE 100, there’s a grand total of three technology stocks. This lack of exposure to the tech sector is one of the leading reasons why UK shares have underperformed compared to the US stock market over a number of year.
But even with such a limited selection, RELX (LSE:REL) still stands out as the 10th-largest business in the index.
With a market cap of £62bn, RELX is bigger than Barclays, Vodafone, and even Lloyds. Yet most households have never heard of it.
So, what does this company actually do? And more crucially, should investors be considering it for their portfolios?
The FTSE 100’s hidden tech giant
RELX is a leading global provider of data. It offers a broad range of analytical and decision-making tools to help companies, universities, and even governments make better data-driven decisions with a speciality in supporting legal, healthcare, scientific, and business risk management.
This broad range of applications means the group’s customer base is highly diversified:
- Banks use RELX’s data to tackle money laundering and fraud.
- Insurance firms rely on it for building risk and premium-pricing models.
- Pharmaceutical giants depend on it for researching novel medicines and treatments.
And as such, the company naturally benefits from enormous switching costs protected by a durable competitive moat of proprietary massive databases that rivals can’t easily replicate.
Combining all this with a subscription-based revenue model, the result is a highly cash-generative business that’s vastly outperformed its parent index over the long run.
Still worth considering in 2025?
With so much growth already under its belt, is it too late to invest in this FTSE 100 stock? In my opinion, no.
Even with a £62bn market cap, the business continues to excel with robust top-line growth backed by expanding profit margins. And management is actively investing in new AI tools for customers, creating new growth opportunities to upsell its services and expand its pricing power.
However, while I’m bullish about the long-term trajectory of this business, there are still some risks to highlight.
The group’s balance sheet carries a fairly chunky £7.5bn pile of debts & equivalents. From a cash flow perspective, RELX generates more than enough money to afford this. But with interest rates still elevated, the cost of servicing these obligations is rising, putting more pressure on liquidity.
This amplifies the risk if customers start begin the cut back on their subscriptions due to weaker economic conditions or regulatory changes. And with RELX shares trading at a premium price-to-earnings ratio of 32, that could be enough to spark some unwanted downward volatility.
Nevertheless, given the quality of this business and the ever-increasing demand for data, investors may still want to consider taking a closer look at this FTSE 100 enterprise. But it’s not the only exciting growth stock I’ve got my eye on right now.
