What Does The Interpublic Group of Companies, Inc.'s (NYSE:IPG) Share Price Indicate?
Let's talk about the popular The Interpublic Group of Companies, Inc. (NYSE:IPG). The company's shares had a relatively subdued couple of weeks in terms of changes in share price, which continued to float around the range of US$35.66 to US$38.88. However, is this the true valuation level of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Interpublic Group of Companies’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
View our latest analysis for Interpublic Group of Companies
What is Interpublic Group of Companies worth?
According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 19.96x is currently trading slightly above its industry peers’ ratio of 16.47x, which means if you buy Interpublic Group of Companies today, you’d be paying a relatively reasonable price for it. And if you believe Interpublic Group of Companies should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. Although, there may be an opportunity to buy in the future. This is because Interpublic Group of Companies’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will Interpublic Group of Companies generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Interpublic Group of Companies' earnings over the next few years are expected to increase by 37%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has already priced in IPG’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at IPG? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?
Are you a potential investor? If you’ve been keeping tabs on IPG, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for IPG, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Case in point: We've spotted 3 warning signs for Interpublic Group of Companies you should be aware of.
If you are no longer interested in Interpublic Group of Companies, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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