Will the YouGov share price increase, decrease or stay the same in the next 12 months? It’s the kind of question the survey and data firm, set up by Stephan Shakespeare and Nadhim Zahawi, might ask some of its 26 million panellists. Certainly, the Aim-listed YouGov, which first went public in 2005, will be hoping the direction of travel of its share price will reverse: it is down 17 per cent since the start of the year.
Moving into an election cycle will raise YouGov’s profile, although its political opinion polls are now a small part of its business. Most of its work is market research for corporate clients such as the streaming platforms Disney+ and Netflix, for which it provides viewing data.
Tech firms bring in almost a fifth of YouGov’s revenues, and that’s one reason for its share decline. Hedge funds have been shorting the stock amid fears that the inflation-struck, cost-cutting tech sector will trim spending. Those concerns grew after YouGov admitted this summer that clients were taking longer to make decisions and sign deals. The shares, which hit £11.70 in June, are now trading around £8.50, despite a surge since last month’s results.
Those numbers, the first under new boss Steve Hatch, beat expectations. Revenues for the year to July were up 17 per cent at £258.3 million, with operating profit rising by a third to £48.3 million. The higher-margin, customised research unit, where big firms shell out on data to help boost their own sales, is in especially buoyant demand, with adjusted operating profit up 31 per cent at £28 million. YouGov also has net cash of £107 million.
There is some investor concern over Shakespeare, still a leading shareholder, letting it be known YouGov is mulling a US listing, adding to the crowd quitting London. But that’s not set in stone, and there is growth on which to capitalise in the meantime. On top of the current business strength, YouGov’s €315 million (£274 million) deal to buy a consumer panel business from Germany’s GfK is expected to help it gain ground in the lucrative consumer goods category, helping revenues increase by more than £100 million.
Yet the valuation hasn’t recovered: YouGov’s price- earnings ratio — which has been as high as 64 in recent years — is now about 15. That’s 60 per cent cheaper than the average 12-month forward price-earnings ratio over the past five years.
“There has been good momentum going into 2024, and the company is seeing a resurgence in tech client spend of late,” said Jessica Pok, a broker at Peel Hunt. “We believe YouGov remains a top pick in the sector.” Buy.
