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Why Ascential shares are on a break out

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Ascential is a UK media and data business, listed on the London Stock Exchange and also a component of the FTSE 250. Back in the day it sailed under another name, EMAP, and was recognised as a major player in the magazine publishing business. Print, however, is a struggling medium, but we think there is still some upside to be achieved from Ascential shares.

Ascential shares are flying at the moment

Ascential is trading at 419 at the time of writing, having rallied from 319 in late November. It is on a bit of a streak at the moment, having broken the key 400 level which it really has not been able to breach for the last 12 months. There is potential here for Ascential to re-establish the solid growth investors in Ascential saw when it broke out of the 200 area in 2016.

Ascential has been a profitable stock to own in the 2016-18 period although it had a bad year last year. The company does seem to be turning around now, however.

What has changed? The e-commerce and advisory component of Ascential, which goes by the name of Edge, has been selected as a strategic partner by Coca Cola, to support the drinks giant’s international e-commerce operations.

Edge is getting noticed in the blue chip world, and is already being used by Amazon as well as supporting a number of key industry events, like Retail Week.

Not publishing, but data

Ascential has reinvented itself as a global information company when a number of its competitors are throwing in the towel or trying to work out how to make their websites make money for them. We also like the way Ascential is now more actively pursuing a global business model.

Ascential seems to have worked out how to leverage the use of data to help bigger companies work out their own strategy. Believe it or not, many large businesses, the colossi of international commerce, are still blundering around in the dark when it comes to working out what their customers want, especially in the B2B space.

With more and more companies now relying on digital sales rather than customers through the door, so data and analytics are becoming critical components for success. Other big brands that have turned to Ascential Edge for help include Samsung, Pfizer, KraftHeinz and Disney.

The broker consensus forecasts are for Ascential stock to outperform, and it certainly seems to be proving them right. 2019 turnover was £411.7 million, with 2020 forecast turnover of £445 million and £478 million in 2021. Profits are forecast to be in the range of £104-£117 million next year versus 2019 pre-tax profits of £92.9 million.

Debt seems to be manageable, certainly within our own requirements, suggesting Ascential has more than enough cash on hand to meet its short term obligations. The broker consensus target price is 454, with HSBC reiterating its buy rating for Ascential on 13 January.

So where to next for Ascential? Certainly the Coca Cola deal has investors thinking there could be some similar marquee deals in the pipeline, and their current customer slate looks like a who’s who in successful international retail distribution. Q4 results are due out on 25 February.

Data sourced from SharePad. The UK’s no.1 investment data & analysis software for Private Investors as voted for by FT/Investors Chronicle readers.  Discover the advantage at www.sharescope.co.uk/sharepad.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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