Informa (LSE:INF) isn’t the only growth stock to have had a difficult few days. But a 17% decline in the FTSE 100 company’s share price in a week puts it firmly on my radar.
Over the last few years, I think the business has shown itself to be incredibly resilient. And while the stock doesn’t look cheap at first sight, a closer inspection reveals a different picture.
Resilience
Informa’s main line of business is trade shows. These are events where companies in various industries meet to show off their products, take orders, make connections, and enhance their visibility.
They’re global events, which means things that make international trade more difficult – such as tariffs – are likely to be bad for Informa’s business. That’s why the stock is down.
This is a genuine risk for investors to take note of. Over the last few years, however, the FTSE 100 firm has shown itself to be a remarkably resilient operation.
Covid-19 was a huge disruption to live events, but Informa weathered that storm successfully. So while I’m wary of short-term disruption, I don’t doubt the firm’s long-term durability.
Valuation
Informa’s share price might be down 17% in a week, but the stock trades at a price-to-earnings (P/E) ratio of around 32. That’s not an obvious bargain – especially in a falling market.
Yet this is misleading. A big recent acquisition means there are a lot of things weighing on Informa’s net income that are either unusual or don’t involve cash leaving the business.
Looking at free cash flow is a good way of seeing this. In 2024, the firm generated £771m in free cash and a market value of £9.5bn implies a multiple of between 12 and 13.
That’s much more attractive, especially for a firm that has been growing sales at around 12% per year over the last decade. And the business model is an extremely attractive one.
Intangible assets
The key thing for investors to note is that trade shows don’t cost much to run. Informa doesn’t own the venues that host its events, meaning it doesn’t have maintenance costs.
But its most important strength is its intangible assets. To anyone who – like me – isn’t involved in masonry, the World of Concrete trade show probably doesn’t mean much.
To the right people, however, it absolutely does. Events like these are an indispensable part of an industry professional’s calendar – and it’s not just concrete.
The acquisition of Ascential in 2024 has added Cannes Lions – the biggest event for marketers – to Informa’s portfolio. And the firm has a number of these events across various industries.
Worth a look
Informa is the kind of FTSE 100 company that it’s very easy for investors to overlook. But there’s an awful lot to like about the stock and the underlying business.
The popularity of the firm’s live international events has shown itself to be resilient in the toughest of environments. And I think this bodes well for the long term.
With share prices falling across the board, investors might naturally find themselves focusing on more household names. But I think that’s a mistake – Informa is well worth considering.
This post was originally published on Motley Fool
