The Motley Fool

Here’s a share I’d buy despite Brexit!

Today, we have another blistering set of full-year results from international data and analytics company YouGov  (LSE: YOU). The firm has delivered a great performance on the stock market so far, and I reckon there’s likely more to come for shareholders over the coming years.

However, the company is highly rated with a forward-looking earnings multiple for the trading year to July 2020 running near 35, with the share price close to 540p.

But consider this: despite all the economic and political uncertainty we’ve seen, the share price has risen around 17% since my last article on the company at the time of the interim results in April. Indeed, the shares of fast-growing enterprises can perform well despite their high-looking valuations.

Great figures

And today’s figures are good. Revenue rose 17% compared to the equivalent period last year and adjusted earnings per share shot up 30%. The directors offered their seal of approval and demonstrated confidence in the outlook by slapping 33% on the total dividend for the year.

Underlying the headline numbers, revenue from the Data Products & Services division increased by 32%, and now accounts for 56% of the total. Meanwhile, revenue from the Custom Research division went up by 2%. But the firm is focusing on “higher-margin work” in that sector and there was a 10% increase in adjusted operating profit in the period.

So, more than half the business is growing like mad and the rest is improving its profitability. That strikes me as a desirable outcome for the firm.

The directors said in the report that YouGov saw a “strong” performance from its operations in the UK and the US. Around 42% of external sales came from America and 25% from the UK, so most of the business is performing well.

Chief executive Stephen Shakespeare explained in the narrative that the firm has exceeded its “ambitious” five-year growth targets. The idea was to expand YouGov’s “international reach, develop best-in-class products and dynamically respond to changing client needs.”

The plan worked well and shareholders have seen a more than 420% increase in the share price over five years, with the dividend rising about 400%.

A “strong” outlook

But in fairness, you probably won’t be buying this share for its dividend yield, which stands at just above 0.7%. The rate of dividend growth reflects the company’s progress, but earnings cover the payment about four times, which is quite a high level of cover. And high cover suggests to me the directors see plenty of growth left under the hood. Shakespeare said: “We remain very ambitious.”

Indeed, the next five-year growth plan has started and includes this results report, which shows the company has made “a great start.”  

Shakespeare summarised the year by saying the company delivered strong growth in earnings, has been winning more clients, taking on larger contracts and projects, and strengthening its position “across the globe.” 

The directors’ outlook for the business is “strong.” If the valuation was lower, I’d snap the shares up without hesitation. But even now, I see the earnings multiple as a mark of quality and would be keen to own a few bought on dips and down-days.

Under-The-Radar Investment

There are a number of small-cap stocks that could be worth buying right now, and our investing analysts have written a FREE guide called “1 Top Small-Cap Stock From The Motley Fool”.

The company in question may have flown under your investment radar until now, but could help you to build a great income from your investments and retire early, pay off the mortgage, or simply enjoy a more abundant lifestyle.

Click here to find out all about it — it's completely free to do so.

Kevin Godbold has no position in any share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.