ComScore Stock Price: Huge Runup But Still Has Gas Left In Its Tanks

  • ComScore reported strong Q1 2015 results with strong topline as well as bottomline performance.
  • The strong financial performance has led to a 78% upside in the ComScore stock price over the last one year and 18% gain in the year-to-date.
  • Despite the huge runup in the ComScore stock price, the stock could be headed higher.
ComScore stock analysis

Leading web analytics measurement company, ComScore (NASDAQ:SCOR) has lately been putting together pretty decent growth numbers. During its latest quarter, ComScore reported revenue of $87.1 million, a good 15%Y/Y growth while its EBITDA improved 25% Y/Y to $21.3 million. Meanwhile EBITDA margin improved 200 basis points to 24% of revenue.

The investing world has been celebrating the company’s rejuvenated growth, which has led its shares to a gain of 92% since the beginning of 2014. ComScore stock price is up 78% over the past 12-months and 18% in the year-to-date.

Despite the huge runup in the ComScore stock price, I believe that the shares still have significant near-term and long-term upside.

Cross-Platform Measurement

One of the chief reasons why ComScore has been doing well can be chalked up to the rapid growth of connected devices. The explosion in the number of connected devices and the advent of TV moving to digital has resulted in more fragmentation in the number of platforms that marketers would love to track to gain more customer insights. As a result marketing analytics measurement companies such as ComScore and Nielsen Holdings (NYSE: NLSN) have seized the opportunity and built de-duped cross-platform measurement tools and also beefed up their traditional platforms with mobile and digital video integrations.

ComScore launched its first cross platform measurement tool, Media Metrix Multi-Platform in 2012. ComScore bolstered its new platform by acquiring Mdotlabs, a cybersecurity startup that uses machine learning to combat online fraud, in 2014. ComScore also launched the Total Video Cross-Platform Planning System that provides unduplicated audience metrics for both TV and digital video, and followed it up with the launch of Video Metrix 3.0, a tool that marketers can use to track video audiences across over-the-top, or OTT, desktop, mobile and tablet devices.

While ComScore’s cross-platform approach seems like encroaching on Nielsen's territory, the company has insisted that it has no plans to take on linear TV by launching a standalone TV service. And neither does it need to. The company’s cross-platform can be used by marketers as an alternative service to traditional TV ratings providing ComScore with a non-traditional revenue opportunity.

The market did not react too well when ComScore acquired Proximic, a company that builds pre-bid solutions for both buyers and sellers, earlier in the year because the company lowered its guidance shortly afterwards. This suggests that the new opportunity came calling on short notice and the company had not factored it in its earlier guidance. But, investors should in reality be happy because the acquisition appears to add a necessary piece of the puzzle to ComScore’s broad offerings in multi-device advertising analytics, and will soon become accretive to the company’s earnings. After all, ComScore has a sound-track record of making highly strategic acquisitions and partnerships. ComScore partnered with Google in 2014 in a bid to give Google’s DoubleClick real-time ad campaign measurement by using ComScore’s Validated Campaign Essentials, or vCE. ComScore’s vCEs are now used on Google display ads on video and mobile devices. The results of the Google deal are already evident on ComScore’s bottom line, which grew by a healthy clip during the latest quarter compared to last year when earnings tanked 314%.

Despite facing intense competition from bigger rival Nielsen in the new cross-platform segment of the market, the general consensus is that ComScore tools are easier to use, offer a better value proposition, and are more insightful and actionable. Moreover, TV advertising has become prohibitively expensive, with a prime time TV spot now going for around $75,000-- nearly 10 times the cost a mere 5 years ago. This has accelerated the shift to digital video advertising instead, which is playing into the hands of ComScore and its new cross-platform measurement approach.

Though ComScore stock has enjoyed a huge runup, I believe the shares can still run even further. ComScore’s earnings are projected to grow at a 23.30% CAGR over the next five-year period. At 4.5 times 2015 sales, the shares might be a bit expensive but I believe the market now recognizes the company's new opportunity and is repicing it into ComScore stock.

Note: Also watch ComScore stock analysis video covering the fundamental analysis of ComScore.

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