Following a 26 per cent 12-month share price fall, WPP (WPP) has just reported a decent set of first-quarter numbers which have reminded investors that, at its core, this is a quality company. Thus, current and prospective WPP shareholders are now facing a classic investment question: do the negative market trends mean this is still a company in free fall, or has WPP finally hit the bottom? Or, to put it plainly, is WPP now a buying opportunity?
At first glance we are erring toward the side of caution. True, first-quarter numbers came in ahead of expectations, but revenues were still down 4 per cent – a sign that the advertising market is still in turmoil and WPP is woefully underprepared for the growth in digital. Plus, the company is without a real leader following the abrupt resignation of its founder Sir Martin Sorrell.
But WPP does own some quality divisions, which investors have been reminded of by reports that first Neilson and now CVC want to buy its market research arm, Kantar Media. The fact that the group is rading on just 10 times forward earnings makes it an even more attractive target.
