BVA And PRS IN VIVO Will Redefine Global Digital Research

Key Takeaways

• Ipsos' acquisition of BVA and global rollout of PRS IN VIVO's services could enhance market position and revenue growth.
  
• Use of AI and digital solutions boosts research efficiency, reduces costs, and supports productivity and earnings growth.
  
• Ipsos faces risks from global political instability, negative organic growth, market-specific challenges, and potential revenue impacts from tariffs and currency fluctuations.

Catalysts

Through its subsidiaries, provides survey-based research services for companies and institutions in Europe, the Middle East, Africa, the Americas, and the Asia-Pacific.

• Ipsos' acquisition of BVA is expected to enhance its market position and bring additional revenue, particularly through PRS IN VIVO's expertise in Pack Testing, which could increase Ipsos' revenue as these services are rolled out globally.
  
• The use of AI and synthetic data to improve research efficiency and reduce delivery times is anticipated to drive productivity increases, potentially enhancing net margins by reducing costs associated with traditional research processes.
  
• Ipsos.Digital is experiencing strong growth, with a target of €140 million in 2025, which could significantly contribute to revenue and earnings growth as it capitalizes on increasing demand for digital research solutions.
  
• The restructured U.S. management is expected to bear fruit, potentially reversing declines and contributing to organic growth, supporting earnings recovery amidst an uncertain political environment.
  
• Positive organic growth visibility and an active order book for 2025 indicate potential future increases in revenue, driven by improvements in Europe and anticipated recovery in the U.S. market later in the year.

Ipsos Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Ipsos's revenue will grow by 3.6% annually over the next 3 years.
• Analysts assume that profit margins will increase from 8.4% today to 9.1% in 3 years time.
• Analysts expect earnings to reach €247.8 million (and earnings per share of €5.8) by about April 2028, up from €204.5 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 13.3x on those 2028 earnings, up from 8.5x today. This future PE is greater than the current PE for the GB Media industry at 11.6x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.14%, as per the Simply Wall St company report.

Ipsos Future Earnings Per Share Growth

Risks

• The significant global political instability, particularly the uncertainty caused by American tariffs, poses risks to Ipsos’ business environment, potentially impacting revenue and earnings as clients may delay or reduce spending.
  
• The organic growth is slightly negative in early 2025, with a 1.8% decrease, compounded by challenging conditions in the Asia Pacific region, particularly China's lack of recovery, which could impact overall revenues.
  
• The sharp decline in the Public Affairs business in regions like France and the U.K., impacted by the electoral cycle and government spending cuts, highlights vulnerabilities in maintaining consistent revenue streams in politically sensitive areas.
  
• The U.S. market remains a source of uncertainty, with the management team only recently fully operational and facing a complicated political context, possibly affecting earnings and growth from this major market.
  
• Currency fluctuations, potentially worsened by the tariffs situation, could have a negative effect on Ipsos' top line, although the impact on net margins is expected to be limited due to local currency cost base stabilization.

Valuation

• The analysts have a consensus price target of €64.022 for Ipsos based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €74.0, and the most bearish reporting a price target of just €44.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €2.7 billion, earnings will come to €247.8 million, and it would be trading on a PE ratio of 13.3x, assuming you use a discount rate of 6.1%.
  
• Given the current share price of €40.32, the analyst price target of €64.02 is 37.0% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.