In a recent issue of
, Ariel Capital's John W. Rogers identifies three stocks he
thinks are undervalued. The first on his list: Interpublic Group
Interpublic is the giant ad agency that's home to businesses
including McCann and Draftfcb. A few years ago, the company was a
mess and hurt even more when the economy tanked and companies cut
back on ad spending. Now to say, as Rogers does, that it has
since "boosted profitability" seems like an understatement.
IPG Revenue TTM
It has also bought back a half billion in convertible
IPG Debt to Equity Ratio
And it has bought back 52 million shares, a whopping fifth of
IPG Stock Buybacks
Even with that, Interpublic still had enough cash to pay a
dividend for the first time in years.
Rogers compares its price to expected 2012 earnings, 13.7. We
prefer to look at what it has done, using trailing twelve month
earnings per share. Looked at that way, it's cheaper than rival
OMC PE Ratio
All sounds good. But a few notes of caution: First, it's
trading higher than its historical multiple so YCharts Pro rates
Second, advertising is a volatile business, and even long-term
relationships can be severed, as they were last year at
Interpublic when it lost an SC Johnson account that it had
handled for more than a half century.
And Interpublic has benefited from, of all things, Facebook (
). It reportedly invested $2.5 million in 2006 and reaped $383
million when it unloaded in August 2011 and at the initial public
offering. That's a nice chunk of change to factor in, even if
Interpublic says most of its growth has been organic.
From the editors of YCharts.
YCharts Pro Investor Service