COMSCORE, Inc. (NASDAQ:SCOR), with a market cap of $678.1 million, provides a digital marketing intelligence platform and on-demand digital analytics solutions that help customers make more informed, data-driven business decisions.
As companies face slower growth globally, they need to spend more wisely and effectively with their available marketing and advertising budgets. This is where COMSCORE, Inc. (NASDAQ:SCOR) fits in; the company provides an intelligence platform that allows customers to analyze and deliver more cost-effective digital marketing.
Management continues to pursue the company’s top four key priorities, which include maintaining measurement leadership (in mobile and multi-platform), continuing campaign measurement progress and global roll-out, capitalizing on the Digital Analytix momentum, and executing to improve margins and free cash flow. COMSCORE, Inc. (NASDAQ:SCOR) delivered a strong Q1 and the share price jumped over 19% after the earnings release.
For Q1, the record level pro forma revenue was $67.5 million, up 12% year-over-year, driven by strength in audience analytics and new products. The profitability was strong for Q1, with pro forma adjusted EBITDA of $12.6 million, driven by higher revenue and cost controls. The company also generated free cash flow of $16.9 million.
The Procter & Gamble Company (NYSE:PG) as a strategic partner
New products, including Validated Campaign Essentials (vCE), DAx, subscriber analytics, and Mobile Metrix 2.0, will contribute around 28%-30% to comScore’s annual contract value in 2013. COMSCORE, Inc. (NASDAQ:SCOR) had formed a partnership with The Procter & Gamble Company (NYSE:PG), the largest advertiser in the world, which provides consumer packaged goods. Procter & Gamble has over 300 brands spread across 180 countries, and invests heavily (around $8 billion) in advertising. However, The Procter & Gamble Company (NYSE:PG) continues to work on cost cutting due to competitive pricing and slowing growth. More effective spending and marketing remains an important priority for Procter & Gamble.
American Express Company (NYSE:AXP) is another major client signed up for vCE service. American Express is a global payments and network company, which also provides travel services. American Express also spent heavily on advertising and ranked No. 8 for America’s biggest advertisers, with over $2.1 billion of total ad spending in 2011. American Express Company (NYSE:AXP) continues to focus on premium quality lending, while investors are concerned about increasing operating expenses. American Express Company (NYSE:AXP) will continue to rely on media/ad technology to cost-effectively boost growth.
Procter & Gamble and American Express are not alone, as 22 of the top 25 largest global advertisers (89% of global ad dollars) are vCE/CE clients. Further, top ten CPG advertisers also work with comScore. COMSCORE, Inc. (NASDAQ:SCOR) continues to be supported with a strong client base.
The management expects revenue of $65.6 million-$68 million, with an adjusted EBITDA of $10.5 million-$12.0 million for Q2, 2012. For 2013, non-GAAP pro forma revenue is expected to be $275.5 million-$283.5 million with pro forma adjusted EBITDA of $48.3 million-$54.8 million.
Analysts’ calls and estimates
On May 3, 2013, Cantor Fitzgerald upgraded comScore from a “hold” to “buy” rating with a price target of $20.00 (from $16.00), as the analyst believes COMSCORE, Inc. (NASDAQ:SCOR) is gaining traction with new offerings. Goldman Sachs also upgraded comScore to “neutral” from “sell” with a new price target of $17, citing the business has stabilized following rationalization of underperforming segments, and the valuation now better reflects comScore’s growth rate. Analysts, on average, are estimating an EPS of -$0.09 with revenue of $276.67 million for 2013, which is 8.40% higher than 2012.
Fundamentally, despite lower margins and returns, comScore continues to enjoy a higher revenue growth (three-year average) of 25.9, compared to the industry average of 6.5. comScore has a healthy balance sheet with a strong cash position, holding $73.74 million of cash with $18.95 million total debt as of March 31, 2013. comScore also generated a positive levered free cash flow of $41.97 million in the trailing 12 months. At the current valuation, comScore’s Forward P/E of 28.2 (vs. the S&P 500’s average of 14.6) is justified with its higher revenue growth.
As for the share price performance, comScore has been on the long-term uptrend since November 2012 and has broken through its long-term uptrend resistance after the Q1 earnings release. COMSCORE, Inc. (NASDAQ:SCOR) is getting bullish, technically.
The bottom line
With in-demand new product offerings and a strong client base, comScore is working on the right path to maintain its leadership, while expanding margins and boosting its free cash flow. comScore continues to be a solid growth investment target, supported with a healthy balance sheet. Presently, comScore remains technically strong after breaking above its 50-day MA and its long-term uptrend resistance.
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The article comScore Scores Big With Q1 Earnings originally appeared on Fool.com and is written by Nick Chiu.
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