On Thursday, Morgan Stanley resumed coverage on Informa Plc (INF:LN) (OTC: IFJPY) shares, assigning the stock an Equalweight rating and setting a price target of £9.00. The firm's analysis pointed to a shift in performance and outlook for the company since the COVID-19 pandemic.
Prior to the pandemic, Informa's shares generally traded at a 14-15x adjusted price-to-earnings (P/E) ratio. The company's growth expectations have now increased, with projections of approximately 5%+ organic growth from the financial year 2025 (FY25) compared to the 3-4% experienced between FY17 and FY19.
Morgan Stanley highlighted that Informa's leverage is currently towards the upper end of its target levels, similar to the situation in 2018/19, with an expected net debt to adjusted EBITDA ratio of approximately 2.5x for FY24.
Despite the stronger business fundamentals, such as greater scale and digital investments, as well as the addition of higher growth acquisitions like Tarsus and Ascential, the near-term macroeconomic outlook is clouded by uncertainty.
The firm's analysts believe that investors are looking for confidence that Informa's growth rate will stabilize at an underlying rate of 5% or more from FY25 onwards, rather than reverting to the pre-COVID rate of 3-4%.
Morgan Stanley forecasts an underlying growth of 5.3% for FY25, which is a decline from the 11.2% expected in FY24. This anticipated drop is partly due to the fallout of some revenue related to AI content deals in Informa's Taylor & Francis division.
InvestingPro Insights
To complement Morgan Stanley's analysis, recent data from InvestingPro offers additional insights into Informa Plc's financial position. The company's market capitalization stands at $14.47 billion, with a P/E ratio of 36.79, reflecting the market's positive expectations for future earnings growth. This aligns with Morgan Stanley's observation of increased growth projections for the company.
InvestingPro Tips highlight that Informa has been aggressively buying back shares and offers a high shareholder yield, which could be seen as management's confidence in the company's future prospects. Moreover, Informa has raised its dividend for three consecutive years, potentially appealing to income-focused investors.
The company's revenue growth of 20.61% over the last twelve months and an EBITDA growth of 41.95% during the same period underscore the strong performance mentioned in the article. These figures support the notion of improved business fundamentals and the potential for sustained growth that Morgan Stanley discusses.
It is worth noting that InvestingPro lists 11 additional tips for Informa Plc, providing a more comprehensive analysis for investors seeking deeper insights into the company's financial health and market position.
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