UBS has upgraded YouGov PLC (AIM:YOU) to 'buy,' citing improved confidence in the company's value and future performance.
The move followed the pollster's trading update, which addressed key concerns and showcased effective internal changes.
In June, UBS noted YouGov's attractive valuation but highlighted uncertainties that prevented a bullish outlook.
The recent update from management has resolved many of these issues, particularly through robust and swift cost optimisation plans, UBS said. These measures are expected to enhance trading performance in the current financial year.
UBS says YouGov's stock is trading at 14 times the estimated 2025 earnings per share, with a projected 24% annual EPS growth from 2025 to 2027.
The company offers a mid-term EBIT growth in the high teens, a mid-teen return on invested capital, and an average cash conversion rate exceeding 95%.
Although UBS seeks proof of planned cost savings within the next six to 12 months, it believes the worst is behind YouGov and views current stock multiples as a compelling entry point.
The company has identified £20 million in annual cost savings, with 70% already executed, mainly through headcount reductions.
This initiative is expected to save around £13-14 million in FY 2025, boosting the adjusted EBIT margin to 16.7%, a 300 basis point increase year-over-year. UBS has accordingly raised its EBIT forecasts for FY 2025 by 17%.
With the shares significantly down since the profit warning, they now trade at a discount to stock in peer IPSOS. UBS has set a new price target of 700p.
In afternoon trading, the price was down 3% at 530p.