This morning BrainJuicer plc (LSE: BJU), the unorthodox marketing firm, upgraded full-year profit forecasts on the back of strong performances from its Advertising Testing and Brand Tracking services. The company boasts an impressive client portfolio, includingHeineken, Hersheys and Shell.
Another extraordinary marketing firm, Next Fifteen Communications (LSE: NFC), has an equally impressive customer base including Alphabet, Apple and Microsoft.
Many investors believe these two companies could grow alongside their clients, but is BrainJuicer the better buy after todays positive update, or does Next Fifteens consistent track record give it the edge?
BrainJuicer doesnt believe in persuading customers using facts and figures. Humans tend to make snap decisions and consider only the top three or four brands when buying low-ticket items like ice creams.
Therefore, rather than focusing on the logical qualities of a product BrainJuicer bases its campaigns around Fame, Feeling and Fluency.
This novel approach drove an incredible 30% compound annual revenue growth rate between 2005 and 2013, with profits following along. The companys expansion has been more muted in recent years however, growing only 3% total since then.
Its share price is approaching all-time highs, which seems overdone considering recent lacklustre revenue growth. Management also failed to quantify the outperformance, therefore lowering its value.
Todays news is great for current shareholders, but a PE of 20 times might seem a little steep for those looking to buy the shares, especially if BrainJuicer cant reignite revenue growth.
Two decades of growth
Next Fifteen Communications provides tech giants with PR, marketing and niche technical services.
The company might not have expanded as quickly as BrainJuicer, but its track record is no less impressive given its consistency. It has been profitable in all but two of the last 20years and has grown revenue from 7.9m to 129.8m, or a CAGRof 6.9% in the same period.
A slew of acquisitions has turned it into a full-service provider over the last few years, which could facilitate revenue growth for some time.
BrainJuicers revenue growth has slowed down a little over the last few years, but Next Fifteens has been picking up the pace, jumping 23% last year.
I believe Next Fifteens revenues could be more defensible than BrainJuicers too because serving companies like Apple requires a deep understanding of tech that isnt easily replicated.
BrainJuicer or Next15?
BrainJuicer has used its pause in growth to focus on margin expansion. The company reported an impressive 19% operating margin last year, compared to Next Fifteens 8%. Such a high figure implies that its services are still unique, otherwise competition would likely drag down profitability towards single-digits.
Next Fifteen trades at a rich 60 times last years earnings, but this figure doesnt take into account the companys rapid expansion, orits strong cash-flow. You see, earnings have recently been hit by high amortisation costs following past acquisitions. If we ignore these non-cash charges, the company looks a little cheaper at only 23 times free cash flow generated in the last 12months.
Interestingly, BrainJuicer trades on 22 times the same metric.
Both these companies are worth a closer look, in my view, but I believe Next Fifteens recent momentum make it a more attractive proposition than BrainJuicers, in spite of todays upgrade.
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Zach Coffell has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.