Tomato ketchup, curry sauce and mushy peas – the number one regional favourites for chip toppings in the UK, excluding the classic salt and vinegar. Ketchup comes out on top in England (34%) and Scotland (25%), while curry sauce triumphs in Wales (35%) – such is YouGov’s (YOU) ability to get to the heart of British opinion. While such matters may seem trivial to most, access to up-to-date, niche information can be extremely valuable to YouGov's customers, and the online data gatherer has been very adept at making ever-increasing profits from selling its services.
Improving margins
Robust balance sheet
No operational disruption from Covid-19
Exposed to the health of the economy
Intense competition in the US
At the core of the business sits a global panel of more than 9m people providing real-time market insights – a formidable research-resource for a new entrant to replicate. YouGov exploits the value of this treasure trove of information through its platform, Crunch. The cloud-based software enables clients to engage with data and survey results – essentially allowing them to analyse the behaviour of their customers in real-time.
This focus on data has not only improved the quality of YouGov’s research, it has also driven up its gross margin, which stand at a healthy 75.8 per cent for the last 12 months. Meanwhile, return on capital employed (ROCE) – a measure of how much profit is generated from investments made into the business – has more than quadrupled in the last four years to 16.9 per cent. This has been helped by the development of the subscription-based BrandIndex platform.
The largely digital nature of YouGov’s business means it has faced limited operational disruption from coronavirus – although management did note in a trading update that in the data services division Covid-19-related work offset a decline in normal project work. The segment typically makes up a quarter of the company’s overall top line.
But the key risk that YouGov faces is that the general link between the market research industry and the health of the economy. Management has assured that trading has held up relatively well so far, although it is still difficult to assess the depth of the recession that looms ahead. That is not to mention an intensely competitive market in the US, where the company faces giants such as Gartner (US:IT), Forrester Research (US:FORR) and IHS Markit (US:INFO).
Looking forward, YouGov’s sights are set on its current five-year plan. From 2019 to 2024, management aims to double both group revenue and adjusted profit margins – the latter stood at 13 per cent at last count – and achieve an EPS compound annual growth rate (CAGR) of at least 30 per cent. Ambitious perhaps, but the company did comfortably beat its old five-year targets, which included delivering EPS CAGR of 29 per cent compared with the goal of 25 per cent.
| YouGov (YOU) | |||||
| ORD PRICE: | 840p | MARKET VALUE: | £911m | ||
| TOUCH: | 830-850p | 12-MONTH HIGH: | 860p | LOW: | 393p |
| FORWARD DIVIDEND YIELD: | 0.6% | FORWARD PE RATIO: | 51 | ||
| NET ASSET VALUE: | 95p* | NET CASH: | £17.4m** | ||
| Year to 31 Jul | Turnover (£m) | Pre-tax profit (£m)*** | Earnings per share (p) | Dividend per share (p) | |
| 2017 | 107 | 16.4 | 10.5 | 2.00 | |
| 2018 | 117 | 16.4 | 7.7 | 3.00 | |
| 2019 | 136 | 20.5 | 14.2 | 4.00 | |
| 2020*** | 153 | 25.0 | 14.6 | 4.40 | |
| 2021*** | 166 | 28.2 | 16.6 | 4.80 | |
| +8 | +13 | +14 | +9 | ||
| Normal market size: | |||||
| Beta: | 0.8 | ||||
| *Includes intangible assets of £83m, or 76.2p a share | |||||
| **Includes lease liabilities of £9.8m | |||||
| ***Berenberg forecasts, adjusted PTP figures | |||||
