Edison Issues Outlook on EQS Group (EQS)

EQS continues to add functionality to its cloud-based offering, growing its potential share of client spend across investor relations, compliance and corporate communications. H117 top-line growth was boosted by the consolidation of ARIVA (67.5% owned), with good momentum into H217 as clients prepare to meet further regulatory requirements. Operating profits, which dipped 3% y-o-y, were held back by spending on developing new services and on geographic expansion. With the IT and geographic platforms now in place, the EBITDA margin is set to expand over the medium term. The share price has performed strongly over the last year, yet the valuation remains at a discount to larger, more mature peers.

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EQS remains in its investment/growth phase, so comparisons with large global financial information companies are inevitably distorted. Using average historical and forward multiples to revenue and EBITDA, it is clear that, although the shares have increased by over 50% over the last year, EQS still trades at a discount to peers of over 22%. We believe this overstates the development risk and expect the discount to close as EQS's international expansion drives an attractive ROI.  

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SOURCE Edison Investment Research