This little-known tech stock is now the seventh-largest company in the FTSE 100!

When it comes to FTSE 100 stocks, RELX (LSE:REL) isn’t often a name discussed by investors compared to the likes of Lloyds or Rolls-Royce. Yet despite this seemingly lack of interest, the technology business has been quietly climbing up the rankings. So much so, that it’s now the seventh largest company in the UK’s flagship index and the London Stock Exchange as a whole!

What’s behind its strong under-the-radar performance? And should investors finally start paying attention?

What does RELX do?

RELX is an information powerhouse. Businesses and institutions pay a recurring subscription fee to access vast quantities of data used for scientific research, data analytics, and risk management. And in a world where ‘data’s the new gold’, demand for the firm’s services has only increased.

Its long list of customers includes pharmaceutical giants, banks, insurance groups, law firms, shipping companies, and even governments. And without RELX’s data tasks, like fraud prevention, anti-money laundering, and clinical trials, it would be vastly more challenging to tackle.

With that in mind, it’s easy to see why businesses are happy to pay a premium for access. And now that RELX is leveraging artificial intelligence (AI), the value proposition for customers is only getting stronger.

Competitive advantages

Companies don’t climb into the top 10 without having a serious edge over their rivals. And RELX’s competitive moat’s filled to the brim. And three of the biggest are:

Its products are mission-critical for the majority of its customers, resulting in +90% retention rates
It leverages AI and automation to analyse vast datasets far more effectively than alternative platforms and uncover hidden patterns
RELX is the global top dog serving 84% of the Fortune 500 as well as nine of the 10 largest banks and 21 of the 25 biggest insurance firms

Worth considering in July?

Impressive financials paired with a powerful moat certainly point to a winning investment. And with the share price up around 120% in the last five years, shareholders who spotted this opportunity early on have so far been rewarded generously.

However, even the best businesses have risks. While the FTSE 100 stock rarely hits the headlines, institutional investors have taken a great interest. Subsequently, the shares trade at a lofty price-to-earnings ratio of 38!

This premium’s certainly well-deserved considering its past performance. However, as every investor knows, past performance is a poor indicator of future results. And right now, there are growing concerns of market saturation among its mature sectors like law and scientific publishing. If those fears are correct, maintaining its current growth trajectory will become challenging, potentially sparking share price volatility.

This risk’s only compounded by the fact as one of the world’s leading data providers, RELX is a prime target for cyberattacks. And if it can’t defend its systems against malicious intent, its precious data could be leaked, wiping out a key competitive edge.

Those are some prominent risks. Yet, with data only becoming more valuable, management’s pricing power could increase, offsetting market maturity risks. That’s why, even at its premium valuation today, this is a FTSE 100 business investors may want to take a closer look at.

The post This little-known tech stock is now the seventh-largest company in the FTSE 100! appeared first on The Motley Fool UK.

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Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has recommended Lloyds Banking Group Plc, RELX, and Rolls-Royce Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.