YouGov: balance of opinion points to pollster staying put

Free markets, like free elections, are a great way of finding out what people think. Polling and market research group YouGov gives insights into both.

One growing consensus is that the London stock market is not the best place to be listed. Reinforcing that view, YouGov is thinking of ditching its AIM listing and joining the migration to the US. Shares barely budged in response.

YouGov is best known for politics: it publishes voter polls and was co-founded by Nadhim Zahawi, a UK politician whose family sold a large stake in 2018. But the bulk of the company’s sales come from market research. The US is the largest market for these services, accounting for about half of YouGov’s sales.

A sharp derating in YouGov shares plainly irks co-founder Stephan Shakespeare. The stock has fallen from almost 60 times forward earnings at the end of 2021 to just 22 times today.

But moving to the US might simply result in a larger, deeper capital market ignoring YouGov just as much as the City has. The group is only worth £1bn. Sales last year were in the low hundreds of millions.

US-listed Gartner trades at a decent premium. Shares in the tech sector research group change hands at over 30 times forward earnings. But it is a much bigger business: it has a market capitalisation of $26bn and forecast sales approaching $6bn. It merits inclusion in the S&P 500 index, which makes it an obligatory investment for passive funds. 

Smaller local peer Forrester Research points to a different outcome. Its sales were about double YouGov’s last year and it is growing more slowly. Both of those facts are reflected in a forward price-to-earnings ratio of 15 times and a substantial discount to YouGov.

YouGov raised capital to fund the acquisition of a division of German peer GfK in July. The deal was YouGov’s largest ever. Investors only demanded a 3.7 per cent discount for the £51mn placement. That shows the UK market still has a taste for the scale of risk on offer. No opinion poll is required.