WPP plc had a terrible 2018, with the unexpected departure of its lodestar creator, and a stumble in the trajectory of its ever-increasing revenue and earnings. The share price was duly hammered. We feel it has been flattened into irresistible bargain levels. Here’s why…….
WPP passes our test of “will it still be around in 10 years, still paying dividends”. Much has been made of the transformation of the advertising business as the world becomes ever more digital. However, this does not mean the end for Advertisers. As WPP stated in their Investor Day last month – www.wpp.com/investors – businesses will continue to need creativity, media insight, data expertise and knowledge on the use of technology.
WPP’s famously lost the Ford account last year. Perhaps less well known is that they also won major accounts from Mars and Mondelez, both huge spenders in the marketing world. It is the nature of the business that accounts will be lost and won every year.
Since the departure of Martin Sorrell, long time insider Mark Read has been appointed CEO. With such a sprawling company, a captain with inside knowledge to steady the ship made great sense. Mr Read has not rested on his laurels however, initiating a transformation of WPP into fewer, stronger companies better able to meet the ever-changing world in which it operates.
Annual accounts are due on 1 March 2019. Earnings for 2018 are expected to be 107p/share, a drop from 120p last year. However, the dividend has been promised to remain at 60p until earnings are back up to the level where 50% of earnings can be paid out.
At this morning’s price of 874p, the dividend is 6.86%. Trailing P/E is 5.8, with forward P/E still at 8.2. For an on-going FTSE100 company with positive future prospects, this represents an absolute bargain of a price. We strongly recommend BUY.
The author of this piece has a very small, long-held position in WPP. No trading in the company is expected before or after publishing this article. Investors should undertake their own research before making any transactions involving WPP plc or any other company.