SP3 Focus And Scandinavian Expansion Will Drive Success

Key Takeaways

• Commitment to SP3 strategy and AI enhancements suggest potential revenue growth and improved product offerings through technology and automation.
  
• Cost optimization and expansion into new regions indicate improved financial performance and market diversification potential.
  
• Flat growth, missed opportunities, and macroeconomic uncertainties threaten revenue, margins, and investor confidence amid rising costs and structural challenges in key sectors.

Catalysts

Provides online market research services in the United Kingdom, the Americas, the Middle East, Mainland Europe, Africa, and the Asia Pacific.

• The company's commitment to refocusing on its SP3 strategy as a data product-centered platform suggests potential for future revenue growth by leveraging technology and automation, which could enhance product offerings and market reach.
  
• Cost optimization plans aiming for £20 million in savings, with 70% expected to be realized within the year, indicate potential for improved net margins, contributing to better financial performance.
  
• Expansion into new regions such as Scandinavia and plans to extend CPS data collection beyond Europe, including potential future U.S. expansion, suggests potential revenue growth through market diversification.
  
• AI enhancements to data products, incorporating insights from the company's acquisition of AI company Yabble, could increase the appeal and utility of offerings, positively impacting revenue growth.
  
• A renewed focus on building dedicated sales teams for data products aims to increase new sales and renewal rates, potentially boosting earnings and cash flow.

YouGov Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming YouGov's revenue will grow by 3.8% annually over the next 3 years.
• Analysts assume that profit margins will increase from 0.3% today to 12.5% in 3 years time.
• Analysts expect earnings to reach £53.9 million (and earnings per share of £0.32) by about May 2028, up from £1.0 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 15.5x on those 2028 earnings, down from 351.6x today. This future PE is greater than the current PE for the GB Media industry at 12.4x.
• Analysts expect the number of shares outstanding to grow by 0.77% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.68%, as per the Simply Wall St company report.

YouGov Future Earnings Per Share Growth

Risks

• The company experienced flat growth over the years and missed some opportunities, which could impact future revenue growth and investor confidence.
  
• There have been higher staff costs in the first half and challenges with third-party data purchasing, which have impacted the company's gross margins.
  
• The CPS integration has been limited, with a reliance on transfer service agreements that may contribute to inconsistent cash flow and net margins.
  
• Significant changes in key sectors such as e-sports and gaming result in structural challenges, potentially impacting future revenue potential.
  
• There are macroeconomic uncertainties in key markets, particularly in Switzerland and the Nordics, which may create headwinds against revenue growth and overall financial performance.

Valuation

• The analysts have a consensus price target of £5.614 for YouGov 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 £7.6, and the most bearish reporting a price target of just £3.05.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be £429.6 million, earnings will come to £53.9 million, and it would be trading on a PE ratio of 15.5x, assuming you use a discount rate of 7.7%.
  
• Given the current share price of £3.0, the analyst price target of £5.61 is 46.5% 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.