Let's talk about the popular The Interpublic Group of Companies, Inc. (NYSE:IPG). The company's shares received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$34.23 at one point, and dropping to the lows of US$27.56. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Interpublic Group of Companies' current trading price of US$29.09 reflective of the actual value 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's The Opportunity In Interpublic Group of Companies?
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. In this instance, I've used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock's cash flows. I find that Interpublic Group of Companies's ratio of 11.95x is trading in-line with its industry peers' ratio, which means if you buy Interpublic Group of Companies today, you'd be paying a relatively reasonable price for it. Is there another opportunity to buy low in the future? Since Interpublic Group of Companies's share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What kind of growth will Interpublic Group of Companies generate?
Future outlook is an important aspect when you're looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it's the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by a double-digit 17% over the next couple of years, the outlook is positive for Interpublic Group of Companies. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
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 while earnings quality is important, it's equally important to consider the risks facing Interpublic Group of Companies at this point in time. At Simply Wall St, we found 1 warning sign for Interpublic Group of Companies and we think they deserve your attention.
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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.