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Shares in UK market analysis and information analytics agency YouGov (LSE: YOU) took an enormous hit yesterday (20 June). When the market closed at 4.30pm, the expansion inventory was down a whopping 46%.
So, what was behind this huge fall within the share worth? And will traders take into account shopping for the inventory after the sharp decline?
Revenue warning
The large drop yesterday may be attributed to a nasty revenue warning from the corporate.
In a buying and selling replace, the corporate suggested that following its half-year outcomes, posted in late March, it had seen decrease gross sales bookings than anticipated. Because of this, it now expects group revenues for FY24 (the monetary 12 months ending 31 July 2024) to be roughly £324m to £327m (the consensus forecast was for £341m).
It additionally stated that it expects full-year group adjusted working revenue to be £41m to £44m. Provided that H1 adjusted working revenue was £27.9m, we’re taking a look at fairly a giant drop in income between H1 and H2.
It’s value noting that Peel Hunt analysts stated that the brand new steerage for adjusted working revenue was 38% under their earlier forecast.
Because of the revenue warning, analysts at Berenberg have decreased their earnings forecasts for the 12 months ending 31 July 2025 by 19% to 44p.
Low valuation
After the massive drop within the worth, the shares do look fairly low-cost to me.
On the new worth of 440p, the forward-looking P/E ratio is just about 10 if we use that earnings forecast from Berenberg.
That appears low for a corporation that:
- Operates within the fast-growing information trade.
- Grew its revenues from £117m to £258m between FY18 and FY23 (a compound annual development charge of 17%).
- Generated a median return on capital employed (ROCE) of 16% between FY18 and FY23.
Steadiness sheet points
One factor that turns me off the inventory just a little, nonetheless, is the stability sheet.
You see, in July final 12 months, YouGov acquired the Client Panel Enterprise of GfK SE for €315m.
And this concerned taking up a number of debt. On the time, the corporate took on a time period and revolving credit score facility of as much as €280m.
So as we speak its stability sheet isn’t super-strong.
On the finish of March for instance, the corporate had long-term debt of £232m versus fairness of £189m on its books.
This debt might grow to be extra of a difficulty now that income are going to be considerably decrease than anticipated.
It’s value declaring that on the finish of H1, YouGov had goodwill and intangible property of £416m on its books. Which means the corporate had a damaging internet tangible asset worth (NTAV) of -£227m.
Lengthy-term potential
On stability although, I feel the shares are most likely value a better take care of their huge drop. My intestine feeling is that they’re now fairly low-cost.
I’m not anticipating a rebound within the share worth in a single day after the revenue warning. However I feel long-term traders might be rewarded.
