On Tuesday, Berenberg initiated coverage on Ascential Plc (ASCL:LN) (OTC: AIAPF) with a Buy rating and a price target of GBP 3.95. The firm highlighted the company's transition to an events-led business, focusing on its two main franchises: Cannes Lions and Money 20/20. This strategic shift follows the recent disposals of WSGN and its digital commerce business.
The analyst at Berenberg underscored the characteristics that make Ascential a quality asset, including high margins, strong cash conversion, some degree of revenue predictability, and a high return on invested capital (ROIC).
The firm's stance is based on the belief that the consensus forecasts, which predict an adjusted EBITDA compound annual growth rate (CAGR) of 5% over the next three years, are too conservative. Berenberg's assessment is influenced by Ascential's historical CAGR of 14.5%.
The firm's optimistic outlook on Ascential is further justified by the company's financial performance. The analysis suggests that the current consensus underestimates the potential growth trajectory of Ascential's earnings before interest, taxes, depreciation, and amortization (EBITDA). The new price target of GBP 3.95 set by Berenberg reflects this positive assessment.
Ascential's focus on its two key event franchises is expected to be the driving force behind its growth. Cannes Lions, a prestigious festival for the creative marketing community, and Money 20/20, a leading event for the financial services industry, are both well-established events with strong brand recognition.
The Buy rating and price target announcement could potentially influence investor sentiment towards Ascential. The company's stock performance and market valuation in the coming months may reflect the market's reaction to Berenberg's coverage initiation and the firm's confidence in Ascential's growth prospects.
InvestingPro Insights
As Berenberg initiates coverage on Ascential Plc with a positive outlook, recent metrics from InvestingPro provide additional context to the company's financial landscape. Ascential's market capitalization stands at a robust $869.78 million, indicating a significant presence in its sector. Despite a challenging P/E ratio of -4.57, the company's revenue has grown by 7.95% over the last twelve months as of Q4 2023, showcasing its ability to increase sales in a competitive environment. Moreover, Ascential has demonstrated strong cash conversion with a gross profit margin of 64.05%, aligning with Berenberg's highlight of the company's high margins.
InvestingPro Tips suggest that Ascential's stock may be in overbought territory, as indicated by the RSI, and is trading at a high earnings multiple. These insights could be crucial for investors considering the timing of their investments. On the positive side, analysts predict the company will be profitable this year, reinforcing Berenberg's optimistic stance on Ascential's future performance.
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