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Nielsen Holdings plc Message Board

  • southern_comfort75 southern_comfort75 Mar 18, 2011 7:11 AM Flag

    Out year future good, but P/E is too high?

    Let's talk valuation: The outlying future for this company has great potential, with markets growing in the developing world, and good connections and structure already well established in India and China. But what is the real valuation now?
    Nielsen is trading at 56/1 P/E. That means 56 years for the earnings to pay for the stock, barring future growth.
    For comparison let's look at Cognizant, a company that interestingly owned Nielsen for a time back at the turn of the century. Cognizant is trading at 31/1 P/E, or barely over half the price. This is all the more impressive when you look at the share price history of Cognizant. It was $3.41 in 2000 and is now trading at $74.00 (!!!) right through the economic crisis!
    I use Cognizant as an example because Nielsen has no real competitors to compare to. To pay the current share price for Nielsen a shareholder must be hoping for some very strong growth in upcoming years. Growth is assured in the developing markets, but the U.S. and European market will be tough sledding. If the shares come down to some $15 they will would be a fairly good buy, but for now, can anyone justify the currently high P/E? Are the outlying growth projections high enough to justify the price? Quantitative analysis folks, what is your view? Fill us in...:-) It is a good company with future, the only issue is where the share price should be...

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    • You have your facts wrong.
      Cognizant was a company created with the Dun & Bradstreet spin off in 1996. That Cognizant consisted of Nielsen Media and IMS Health, which were spun off into separate public companies in 1998. Nielsen Media is part of NLSN, IMS was recently taken private. Cognizant Technology, was spun off by D&B at a later date.

      • 1 Reply to gfbl11
      • Thanks for the clarification. I do know that Nielsen facilities in those days all carried the Cognizant emblems/logos and used the Cognizant letterhead in those days, but I did not know exactly how the spin off was handled. Cognizant, what a story there since 2000 for the shareholders! Absolutely fantastic return on investment. And the P/E on it, while high, is still not out of reasonable limits...I just wish I had gotten in back then, but that's crying over spilt milk now...:-(

    • I can tell you that its not a strong ocmparison to use Cognizant in any P/E valuation comparison. Cognizant (which i own many shares of and highly recommend but do your own research) is an outsourcing IT company. its no different than TATA or INFOSYS, except that it is growing much more rapidly than either (or Nielsen for that matter).

      In the U.S. Nielsen is a monopoly, but in many of the emerging markets world it is not. Try looking at WPPGY, which by the way, owns the leading ratings company in China, CSM Media Research.

      WPPGY owns much more than ratings businesses, but its been moving in the direction of ratings/research with strong acquisitions over the last decade.

      Good luck!

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