Shares in UK market research and knowledge analytics agency YouGov (LSE: YOU) took an enormous hit yesterday (20 June). When the market closed at 4.30pm, the expansion inventory was down a whopping 46%.

So, what was behind this huge fall within the share price? And may traders take into account shopping for the inventory after the sharp decline?

Revenue warning

The big drop yesterday might be attributed to a nasty revenue warning from the corporate.

In a buying and selling replace, the corporate suggested that following its half-year outcomes, posted in late March, it had seen decrease gross sales bookings than anticipated. In consequence, it now expects group revenues for FY24 (the monetary 12 months ending 31 July 2024) to be roughly £324m to £327m (the consensus forecast was for £341m).

It additionally mentioned that it expects full-year group adjusted working revenue to be £41m to £44m. On condition that H1 adjusted working revenue was £27.9m, we’re fairly a giant drop in income between H1 and H2.

It’s value noting that Peel Hunt analysts mentioned that the brand new steerage for adjusted working revenue was 38% under their earlier forecast.

On account of the revenue warning, analysts at Berenberg have lowered their earnings forecasts for the 12 months ending 31 July 2025 by 19% to 44p.

Low valuation

After the large drop within the price, the shares do look fairly low cost to me.

On the new price of 440p, the forward-looking P/E ratio is just about 10 if we use that earnings forecast from Berenberg.

That appears low for a corporation that:

• Operates within the fast-growing knowledge trade.
• Grew its revenues from £117m to £258m between FY18 and FY23 (a compound annual progress fee of 17%).
• Generated a mean return on capital employed (ROCE) of 16% between FY18 and FY23.

Stability sheet points

One factor that turns me off the inventory just a little, nonetheless, is the steadiness sheet.

You see, in July final 12 months, YouGov acquired the Client Panel Enterprise of GfK SE for €315m.

And this concerned taking over lots of debt. On the time, the corporate took on a time period and revolving credit score facility of up to €280m.

So at the moment its steadiness sheet isn’t super-strong.

On the finish of March for instance, the corporate had long-term debt of £232m versus fairness of £189m on its books.

This debt might grow to be extra of a problem now that income are going to be considerably decrease than anticipated.

It’s value declaring that on the finish of H1, YouGov had goodwill and intangible belongings of £416m on its books. Which means that the corporate had a adverse internet tangible asset worth (NTAV) of -£227m.

Lengthy-term potential

On steadiness although, I believe the shares are most likely value a better take care of their huge drop. My intestine feeling is that they’re now fairly low cost.

I’m not anticipating a rebound within the share price in a single day after the revenue warning. However I believe long-term traders could possibly be rewarded.