Goldman Sachs: Relx Group Offers 'Increasingly Scarce' Combination Of Growth, Returns

Information and analytics company Relx PLC (ADR) RELX can withstand disruption through innovation and its ability to pivot its business toward new growth areas, according to Goldman Sachs. 

The Analyst

Goldman analyst Katherine Tait upgraded shares of Relx from Neutral to Buy and increased her pound/euro-denominated price targets for its U.K. and Amsterdam-listed shares, suggesting 20 percent upside.

The Thesis

Relx shares offer an increasingly scarce combination of improving growth and returns relative to the broader market, analyst Tait said in a Tuesday note. (See the analyst's track record here.) 

Goldman Sachs projects 5-percent organic revenue growth in the 2017-2020 time frame compared to 3 percent in the 2012-2016 period, while the EU media sector is expected to grow 3 percent.

Tait identified what she said are longer-term structural risks faced by the company:

• The rise of open access and its impact on Relx' subscription journals.
• Autonomous driving and its implications for the company's risk business.
• The potential for blockchain-based technologies to disintermediate the legal market.
• The extent to which B2B events can remain insulated from digital disintermediation.

"We conclude that while each represents a risk, such pressures are unlikely to be seen imminently, and RELX has the scope to respond and even benefit before threats materialize," Tait said. 

Goldman also sees scope for further re-rating of the shares to 21.5 times P/E, as scarcity justifies the "new normal."

The Price Action

The U.S.-listed ADRs of Relx are about 29 percent higher over the past year.

At the time of writing, Relx was slipping 1.20 percent to $23.15. 

Related Links:

SizeUp Is Personalizing Small Business Analytics

Savanet Turns Its Custom Analytics Solution Into A Quantamental Dataset

Photo courtesy of Relx Group.