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YouGov in poll position

YouGov is cashing in on soaring demand for market research, yet its shares trade cheaply compared with its growth potential
October 15, 2015

Market research and data analysis company YouGov (YOU) is one year into a five-year growth plan and we are encouraged by what we see. In particular, the use of the internet to develop exciting data-rich, high-margin products that are highly responsive to events should drive profits. And a strong balance sheet coupled with impressive cash conversion means the group is well placed to invest in these prospects.

IC TIP: Buy at 119p
Tip style
Growth
Risk rating
Medium
Timescale
Medium Term
Bull points
  • Strong sales and profit growth
  • Data-driven offerings are popular
  • Growing profile and overseas expansion
  • Shares are cheaply rated
Bear points
  • Exposed to volatile advertising spend
  • Custom research is less profitable

YouGov - whose clients include Bank of America, Google and ITV - is focused on raising its international profile, breaking into new territories, bolstering its range of lucrative data products and services, while improving the profitability and market share of its large custom research business. Success on all four fronts helped it grow organic sales by 11 per cent and adjusted operating profits by 16 per cent in the year to end-July.

 

 

During the year, the group posted constant-currency sales growth across its territories as it rolled out its BrandIndex product - which can measure the impact of advertising campaigns, news coverage and other events on people's perceptions of particular brands - in six new markets including Ireland and Singapore, and opened offices in Bangkok, Sydney and elsewhere.

BrandIndex is part of the group's fast-growing data products and services division, which accounts for a third of revenues and generated a margin of 26 per cent last year, compared with the 13 per cent margin achieved on the two-thirds of revenue that came from the custom research division (after central costs group adjusted operating margin was 11.6 per cent).

Growing revenues from high-margin data products is an important focus for YouGov as it seeks to exploit the potential of one of its key assets, The Cube. The Cube is a vast database of information collected from YouGov's 3.7m panellists worldwide and updated daily. The gathered facts and views power offerings such as Omnibus, the group's fast, inexpensive research service, as well as BrandIndex. The group's Profile tool, which was launched last year, is also gaining traction for the data division. All in all, sales of data products and services rose 22 per cent last year with margins benefiting from the fact that once the group has collected and analysed data it can sell its insight to multiple customers.

Margin progress is also being made in the custom research division with a 200-basis point rise reported last year. The division is benefiting from increased automation of reporting and rising use of YouGov's panel-based systems. This division is also developing new products and two major clients have recently begun using Crunch, a cloud-based data analytics tool.

YouGov is benefiting from increased awareness of its own brand ,which has recently been helped by the publication of a non-fiction best-selling book called 'What Makes us Germans Tick' and the launch of YouGov Profiles LITE - a free online search tool that offers insights into the fan bases of any brand, celebrity or item and was used more than a million times in its first week.

 

YOUGOV (YOU)
ORD PRICE:119pMARKET VALUE:£122m
TOUCH:116-122p12-MONTH HIGH:132pLOW: 100p
FORWARD DIVIDEND YIELD:1.2%FORWARD PE RATIO:13
NET ASSET VALUE:60p*NET CASH:£10m

Year to 31 JulTurnover (£m)Pre-tax profit (£m)**Earnings per share (p)**Dividend per share (p)
201362.66.85.10.6
201467.47.75.80.8
201576.19.16.71.0
2016**82.910.78.01.2
2017**90.312.59.21.4
% change+9+17+15+17

Normal market size: 2,000

Matched bargain trading

Beta: 0.22

*Includes intangible assets of £46m, or 45p a share

**Numis forecasts, adjusted PTP and EPS figures