YouGov plc (LON:YOU), which is in the media business, and is based in United Kingdom, saw a decent share price growth in the teens level on the AIM over the last few months. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s examine YouGov’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
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What is YouGov worth?
YouGov appears to be overvalued by 22.2% at the moment, based on my discounted cash flow valuation. The stock is currently priced at UK£4.80 on the market compared to my intrinsic value of £3.93. This means that the buying opportunity has probably disappeared for now. Another thing to keep in mind is that YouGov’s share price is quite stable relative to the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.
What kind of growth will YouGov generate?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with a negative profit growth of -8.8% expected next year, near-term growth certainly doesn’t appear to be a driver for a buy decision for YouGov. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? If you believe YOU is currently trading above its value, selling high and buying it back up again when its price falls towards its real value can be profitable. Given the risk from a negative growth outlook, this could be the right time to de-risk your portfolio. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on YOU for some time, now may not be the best time to enter into the stock. Its price has risen beyond its true value, on top of a negative future outlook. However, there are also other important factors which we haven’t considered today, such as the track record of its management. Should the price fall in the future, will you be well-informed enough to buy?
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on YouGov. You can find everything you need to know about YouGov in the latest infographic research report. If you are no longer interested in YouGov, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.