Has the Market Pushed Up RELX PLC PLC (RELX)'s Valuation Too Far?

RELX PLC PLC may be overvalued with mixed growth prospects, but the 2 analysts following the company give it an average rating of buy. The analysts have set target prices ranging from $31.15 to $35.78 per share, for an average of $33.47. At today's price of $31.36, RELX PLC PLC is trading -6.29% away from its average target price, suggesting there is an analyst consensus of some upside potential.

RELX PLC, together with its subsidiaries, provides information-based analytics and decision tools for professional and business customers in North America, Europe, and internationally. Based in London, United Kingdom, the large-cap Consumer Discretionary company has 35,700 full time employees. RELX PLC PLC has offered a 1.6% dividend yield over the last 12 months.

RELX PLC PLC has a trailing twelve month P/E ratio of 29.6, compared to an average of 22.33 for the Consumer Discretionary sector. Based on its EPS guidance of 1.1, the company has a forward P/E ratio of 28.5. Based on the 7.4% compound average growth rate of RELX PLC PLC's historical and projected earnings per share, the company's PEG ratio is 4.05. This EPS growth rate is likely not sustainable, so will substitute the broader market's 5-year projected EPS growth rate of 7.1%, which gives us a PEG ratio of 4.2. This suggests that these shares are overvalued.

Furthermore, RELX PLC PLC is likely overvalued compared to its book value, since its P/B ratio of 63.5 is higher than the sector average of 3.12. The company's shares are currently trading 945.1% above their Graham number, implying that they are overvalued in terms of earnings and book value.

If analysts are giving the the company a decent rating despite its hefty price point, it could be related to its strong cash flows. Furthermore, RELX PLC PLC has wide margins as you can see in the financial summary below.

2019-12-31 2020-12-31 2021-12-31 2022-12-31
Revenue (MM) $7,874 $7,110 $7,244 $8,553
Revenue Growth n/a -9.7% 1.88% 18.07%
Gross Margins 65.0% 65.0% 64.6% 64.4%
Gross Margins Growth n/a 0.0% -0.62% -0.31%
Operating Margins 26.2% 21.2% 25.6% 26.9%
Operating Margins Growth n/a -19.08% 20.75% 5.08%
Net Margins 19.11% 17.22% 20.31% 19.1%
Net Margins Growth n/a -9.89% 17.94% -5.96%
Earnings Per Share $0.77 $0.63 $0.76 $1.06
EPS Growth n/a -18.18% 20.63% 39.47%
Diluted Shares (MM) 1,956 1,938 1,939 7,575
Free Cash Flow (MM) $1,709 $1,234 $1,679 $1,965
FCF Growth n/a -27.79% 36.06% 17.03%
Capital Expenditures (MM) -$380 -$362 -$337 -$436
Net Debt / EBITDA 2.13 2.73 2.22 2.07
The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.

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