Market research agency BrainJuicer (BJU:AIM) gains 13.5% to 675p as a buoyant end to the year sees the company’s 2016 performance come in well ahead of expectations.

Gross profit, the company’s preferred top line indicator, is flagged to be up 27% as the company sees continued strong progress in the US and ‘an encouraging recovery’ in Continental Europe.

An increasing proportion of this profit is accounted for by the firm’s higher margin Advertising Testing and Brand Tracking services and with tight control exercised over costs, pre-tax profit is seen 37% higher at £6.2m (after a share-based payments charge of £0.5m).

THE SCIENCE BIT

Brainjuicer’s business model is built around using behavioural science to predict successful marketing strategies.

House broker Canaccord Genuity upgraded its forecasts by 4% after an encouraging December update but following this latest announcement increases its 2016 pre-tax profit forecast 13% to £6.7m and lifts the £6.6m pencilled in for 2017 by 15% to £7.6m.

BJUchart

Sterling weakness boosted profit from Europe and the North America but, even without this currency tailwind, gross profit would have been up 15% year-on-year.

Despite returning £5.2m to shareholders through dividends and share buybacks the company still ended the year with cash of £7.8m and no debt.

PRICE TARGET HIKED

Canaccord analyst Simon Davies says he sees ‘scope for additional cash returns to shareholders, either through special dividends or share buy-backs’.

‘We raise our TP from 590p to 720p to reflect the upgrades and roll forward to a FY18 EV/Ebitda valuation of 10.0x, a 10% discount to WPP,’ he adds. ‘This translates into a 14.0x FY18F PER, in line with the higher quality Media Agency peer group.'

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Issue Date: 20 Jan 2017