Marketing Stocks

Interpublic Group of Companies Inc Valuation – March 2019 #IPG

Company Profile (excerpt from Reuters): The Interpublic Group of Companies, Inc., incorporated on September 18, 1930, is a global advertising and marketing services company. The Company specializes in consumer advertising, digital marketing, communications planning and media buying, public relations and specialized communications disciplines. It operates in two segments: Integrated Agency Networks (IAN) and Constituency Management Group (CMG). Its agencies offer customized marketing programs for clients that range in scale from global marketers to regional and local clients. IAN consists of McCann Worldgroup, FCB, MullenLowe Group, IPG Mediabrands, its digital specialist agencies and its domestic integrated agencies. CMG consists of its specialist marketing services offerings. It has three global networks: McCann Worldgroup, Foote, Cone & Belding (FCB) and MullenLowe Group, which provide integrated, advertising and marketing solutions for clients. Its global media services companies include UM and Initiative, which operate under the IPG Mediabrands umbrella. It also has a range of global specialized communications assets, as well as domestic integrated and digital agencies.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of IPG – March 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $8,852,999,000 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.01 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 92.92% Pass
6. Moderate PEmg Ratio PEmg < 20 15.12 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.69 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.01 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 62.04 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.52
MG Growth Estimate 8.39%
MG Value $38.43
Opinion Undervalued
MG Grade C
MG Value based on 3% Growth $22.05
MG Value based on 0% Growth $12.93
Market Implied Growth Rate 3.31%
Current Price $23.00
% of Intrinsic Value 59.84%

Interpublic Group of Companies Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, poor dividend history, and the high PB ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.98 in 2015 to an estimated $1.52 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.31% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Interpublic Group of Companies Inc revealed the company was trading above its Graham Number of $15.16. The company pays a dividend of $0.84 per share, for a yield of 3.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 15.12, which was below the industry average of 17.84, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-12.81.

Interpublic Group of Companies Inc receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$12.81
Graham Number $15.16
PEmg 15.12
Current Ratio 1.01
PB Ratio 3.69
Current Dividend $0.84
Dividend Yield 3.65%
Number of Consecutive Years of Dividend Growth 6

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $8,182,900,000
Total Current Liabilities $8,123,900,000
Long-Term Debt $3,660,200,000
Total Assets $15,620,300,000
Intangible Assets $5,970,700,000
Total Liabilities $13,187,500,000
Shares Outstanding (Diluted Average) 390,800,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.64
Dec2018 $1.59
Dec2017 $1.40
Dec2016 $1.48
Dec2015 $1.09
Dec2014 $1.12
Dec2013 $0.61
Dec2012 $0.94
Dec2011 $0.99
Dec2010 $0.47
Dec2009 $0.19
Dec2008 $0.52
Dec2007 $0.26
Dec2006 -$0.19
Dec2005 -$0.68
Dec2004 -$1.34
Dec2003 -$1.40
Dec2002 $0.04
Dec2001 -$1.65
Dec2000 $0.89
Dec1999 $1.11

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.52
Dec2018 $1.42
Dec2017 $1.27
Dec2016 $1.15
Dec2015 $0.98
Dec2014 $0.89
Dec2013 $0.73
Dec2012 $0.73
Dec2011 $0.58
Dec2010 $0.33
Dec2009 $0.18
Dec2008 $0.02
Dec2007 -$0.37
Dec2006 -$0.70
Dec2005 -$0.97
Dec2004 -$0.97
Dec2003 -$0.59

Recommended Reading:

Other ModernGraham posts about the company

Interpublic Group of Companies Inc Valuation – April 2018 $IPG
Interpublic Group of Companies Inc Valuation – December 2016 $IPG
Interpublic Group of Companies Inc Valuation – August 2016 $IPG
Interpublic Group of Companies Inc. Annual Valuation – 2015 $IPG
16 Companies in the Spotlight this Week – 4/19/14

Other ModernGraham posts about related companies

Omnicom Group Inc Valuation – February 2019 $OMC
Nielsen Holdings PLC Valuation – June 2018 $NLSN
Interpublic Group of Companies Inc Valuation – April 2018 $IPG
Omnicom Group Inc Valuation – April 2018 $OMC
Nielsen N.V. Ordinary Shares Valuation – July 2017 $NLSN
Lamar Advertising Company Valuation – Initial Coverage $LAMR
Interpublic Group of Companies Inc Valuation – December 2016 $IPG
Nielsen NV Valuation – August 2016 $NLSN
Interpublic Group of Companies Inc Valuation – August 2016 $IPG
Omnicon Group Inc Valuation – July 2016 $OMC

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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