Robust results show solid top line growth, but 25x PE ratio may be high
Companies: YouGov plc
A more than robust set of FY results were delivered today by YouGov (AIM: YOU), showing solid top line growth, margin expansion dividend growth and a solid balance sheet.
Revenue rose 16% to £88m in the year ending July 2016, with adjusted profit then growing a strong 27% from £8.6m to £10.9m, demonstrating YouGov's healthy operational leverage. The main revenue drivers appear to be the BrandIndex and Omnibus divisions which grew at 39% and 30% respectively, contributing £31m of the Group's £88m total revenue.
Looking further down the income statement things get a little more nuanced with statutory EPS coming in relatively flat year-on-year at 3.3p per share (vs FY2015 of 3.2p). However after backing out the amortisation of intangibles plus a few other items, adjusted EPS rose 26% to 8.8p from 7p the previous year.
In a sign of Management confidence, YouGov's dividend has risen 40%, from 1p per share in 2015 to 1.4p per share for 2016. This is covered either 2.3x or c.6x by earnings should you choose to use the statutory or adjusted EPS numbers.
The Balance Sheet is strong with net cash growing from £10m in 2015 up to £15.6m by July 2016. Cash generation is also healthy with YouGov delivering c.£12m in net cash from operations over the period with a cash conversion of 130% of operating profit and FCF of c.£4.5m.
YOU share price is up c.2% in early trading this morning and have risen a sizeable 87% over the last 12 months.
Based on today's numbers YouGov is trading on a trailing PE ratio of either 25x adjusted EPS or a whopping 65x statutory numbers. There are many valid reasons to adjust earnings numbers and provide investors with a clearer idea of underlying performance but in this case, it is also worth pointing out the size of the adjustments which are 1.7x the statutory EPS number and where the majority is driven by reversing out large amortisation balances. Either way, the market is clearly putting a premium valuation on the shares.
Commenting on the results, CEO Stephan Shakespeare said:
"YouGov has delivered strong growth in revenue and profit. The expansion in our global data products and services such as YouGov BrandIndex and YouGov Omnibus demonstrates their stand-alone strength and also the further potential benefits to clients that we can offer by bringing all of our data together in the YouGov Cube. We are continuing our journey towards becoming a global data and analytics business and this will remain the focus of our investment in our technology and staff resources. Trading in the current financial year has started in line with our expectations and we remain well positioned to continue to grow our business in accordance with our goals and to exploit the tremendous potential of YouGov's connected data system."
