One growth stock that I think could do particularly well in 2024, is YouGov (LSE:YOU). Here’s why I’d buy the shares, if I had some spare cash.
According to Rishi Sunak, it’s his “working assumption” that there’s going to be a general election in the second half of the year.
As YouGov has built a strong reputation for undertaking political opinion polling, I’m sure this is going to help its earnings in 2024.
But politics is only part of what it does.
I think there are other compelling reasons why it’s going to have a good year (and many more thereafter).
The company describes itself as an “online research data and analytics technology group“. It provides subscription-based and bespoke data products to 4,300 clients throughout the world.
And it claims to be the most quoted market research source on the planet.
A technological revolution
For a long time, the company’s been using machine-learning and artificial intelligence (AI) to improve the accuracy of its predictions.
It’s also adopted AI to detect and remove ‘suspect’ respondents to its surveys.
But as the technology evolves, I believe there’s likely to be an increase in demand for YouGov’s services.
That’s because AI models need to be ‘trained’ using vast quantities of information. To do this successfully, they require access to reliable source data that’s up-to-date and relevant.
And I think YouGov’s well positioned to meet this demand. That’s why I’m particularly excited about the growth potential for this stock.
An impressive track record
Although past performance isn’t necessarily a guide to what’s going to happen in the future, I think it does indicate whether a company’s been well managed.
Like all rapidly-growing groups, YouGov’s success can be put down to it being good at what it does. And it has successfully integrated the many businesses that it’s acquired.
With the exception of 2019, it’s grown its earnings per share (EPS) in each of its last 13 financial years.
Its adjusted EPS, for the year ended 31 July 2023 (FY23), was 40.5p. For comparison, in FY10, it was 2.5p.
A bargain?
But the shares aren’t cheap. They trade at 30 times’ its FY23 adjusted earnings.
However, this doesn’t put me off as it’s not out of line with other companies in the information sector. For example, RELX, Experian and London Stock Exchange Group, have earnings multiples of 32, 30 and 28, respectively.
Having said that, income investors will be disappointed that its stock is yielding a miserly 0.7%.
With most of its business being conducted online, it’s particularly vulnerable to a cyber attack. And the consequences of failing to comply with data protection legislation could be damaging, both from a financial and reputational perspective.
However, no such problems were identified in its most recent market update.
While acknowledging that the current trading environment was difficult, it said it was confident of meeting analysts’ EPS expectations for FY24, of 39.5p (not adjusted for exceptional items or acquisitions).
In my opinion, YouGov is ideally placed to benefit from the AI revolution, both in terms of improving the accuracy of its existing products, but also increasing the revenues it earns from the developers of machine-learning software.
That’s why I’d be excited to buy the stock, the next time I have some spare cash.
