We live in a world of seemingly endless data. Parsing and analysing this information is crucial across a range of industries and that is something GlobalData (DATA:AIM) really excels at.

We think the company will make a compelling investment for the year ahead due to a renewed focus on growth. The company is committed to developing its artificial intelligence offering and has a strong balance sheet providing firepower for M&A.  

The dealmaking is part of a wider three-year growth transformation plan launched in January 2024 targeting £500 million annual revenue by the end of 2026.

The company also wants to double down on its AI strategy. Having started investing in this area in 2017, it has already started to roll out an AI Hub to clients. As of July 2024, 29% of clients have access to this tool. The company plans to upskill its workforce with AI training sessions and employ 300 AI experts by 2025. Currently it has around 300 software specialists of which 50 focus on AI.

WHAT DOES IT DO?

A globally diversified client base upwards of 4,800 includes names like global food and beverage company Nestle (NESN:SWX) and UK supermarket Asda.

In its own words GlobalData’s platform aims to deliver ‘key insights on market analysis and critical insights into competitors and pricing intelligence’.

About 80% of GlobalData’s sales are subscription-based which provides good visibility on future earnings and the company also has high levels of profitability, looking to maintain EBITDA (earnings before interest, tax, depreciation and amortisation) margins of at least 40%.

What GlobalData charges its customers is a very small proportion of their overall spend but is also really significant to how they do business which helps reinforce the stickiness of its revenue streams.

A rating of 20 times forecast 2025 earnings does not seem overly expensive for a such a high-quality data analytics business. With the stock coming under some pressure thanks to wider concerns about the AIM market.

In fact, on some metrics, GlobalData looks positively cheap versus the peer group. On an enterprise value (EV) to revenue basis GlobalData trades on a multiple of around five times for 2024 according to estimates from broker Panmure Liberum. This compares to an average for its peers (as of mid-November) of 13.7 times and a ratio for its closest UK lookalike – RELX (RELX) of nearer eight times.

A SHIFT IN PRIORITIES

Investors who might have previously valued GlobalData for its income will have been disappointed at the decision to rebase the dividend, revealed alongside first-half results in July. This followed the completion of a £434 million investment by Inflexion to take a minority stake in GlobalData’s Healthcare division.

While the discipline of paying a dividend is important we are on board with the company’s growth ambitions – albeit there are obviously risks to such a strategy. The company has also announced share buybacks to return surplus capital and may well continue to do so.

The plan is to supplement targeted organic revenue growth of 10% by making bolt-on acquisitions which can be integrated into the platform. Reassuringly, the management team has experience of successfully acquiring and integrating assets.

In November, GlobalData snapped up global job market data company LinkUp which uses real-time proprietary technology to index millions of job listings.

Another consideration for a prospective investor is founder and CEO Mike Danson’s large shareholding – he owns nearly 60% of the business. Some may be uncomfortable with this situation.

However, there are plenty of examples of successful listed companies where an entrepreneurial architect behind the business has a controlling stake. 

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