IPSOS SA - Ticker: $IPS.PA

Global player in social and market research. A brief snapshot.

Ipsos SA is a global player in the research industry. The company was founded in 1975 by Didier Truchot in Paris, France and currently owns (as of 31.12.2023) owns 11.25% of the shares and 19.62% of the voting rights:

source: https://www.ipsos.com/en/key-figures-0

DT & Partners is owned by Didier Truchot - he owns 81% of the company and the rest 19% is owned by the management:

source: https://www.ipsos.com/sites/default/files/ct/newsroom/documents/2024-06/Press%20Release%20-%20Ipsos%20Partners%202024%20-%20061124.pdf

The history of the company:

source: https://www.ipsos.com/en/our-history

So we can see that on top of the organic growth the company is using M&A as a strategic growth and expansion lever.

source: https://www.ipsos.com/sites/default/files/FYR%20V2202%20-%20Final%20presentation%20-%20EN%20-%20FINAL_0.pdf

In 2021 the company has a new CEO and the founder continues as the Chairman of the Board. Let’s learn more about Ben Page the CEO at the helm:

source: https://www.ipsos.com/sites/default/files/2024-05/pdf/about-us/Ben%20Page%20-%20EN%20-%2008122022.pdf

You can see that the man has an extensive experience in the industry and is with Ipsos since 2005. Down below you will find a presentation of Ben Page on the topic of change. In my opinion this is one of the best presentations on change I have come across:

Let’s see how and from what the company fait de l’argent:

source: https://www.ipsos.com/en/key-figures-0

source: https://www.ipsos.com/en/key-figures-0

Almost half of the business is related to consumer research.

Are those sales profitable and is that profitability cyclical?

source: https://www.gurufocus.com/stock/XPAR:IPS/report

My personal is that profitability is good, the business is on the services / capital light side and profits are with low cyclicality. Even during the GFC the company is reaping profits. Gross margins are indicating the quality of the business and operating margins are indicating the quality of the management. Gross margins of around 65% is showing a high quality business and consistent operating margins in the 10%-12% range is showing quality management. Only in 2013 operating margin was 9.02% but the net margin was negative - this is from a revaluation to the Synovate transaction after the purchase price allocation period:

source: https://www.ipsos.com/sites/default/files/2016-09/2014_02_26_annual_results_2013.pdf

Overall I think that this is a high quality business in an oligopoly type of industry with low capex requirements (if we don’t count acquisitions):

source: https://www.gurufocus.com/stock/XPAR:IPS/report

Let’s see the insider buying/selling activity:

source: https://www.insiderscreener.com/en/company/ipsos-sa

I will call the insider activity - net positive.

The balance sheet:

source: https://www.gurufocus.com/stock/XPAR:IPS/report

I will elaborate on some key aspects of the balance sheet:

1. Intangible assets (Goodwill in particular) is the biggest chunk of assets. Which is a risk in my book so I will follow that closely. Currently the ROE is with goodwill included is in the 10% - 15% range so that translates into good incremental returns on invested capital. M&A is adding value and securing market position which adds to longevity.

2. We see that interest bearing debt is close to 500M euro / short term debt of around 35M and LT debt of around 460M euro.

3. In a business like this - in the service sector I am very focused on the cash conversion cycle - I want to see collecting receivables faster than paying to suppliers. This modus operandi will juice further the accounting profits and make them of highest quality - cash flowing more than booking as profits !!!

source: TIKR.com

That is what I am talking about.

The company is being continuously financed by its suppliers at 0%. J’aime bien ce, excuser mon français.

source: TIKR.com

Even on normalized cash profits of around 200M - we see that the last 3 years the company was overearning relative to its past and a 15x multiple we get a market cap of 3B euro. Current market cap is around 2B euro.

source: https://www.ipsos.com/sites/default/files/FYR%20V2202%20-%20Final%20presentation%20-%20EN%20-%20FINAL_0.pdf

I own shares.

Thank you, for reading!

PS: This writeup is a personal opinion and not an investment advice. Do your own due diligence.