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Stock of the week: WPP

Written by:
Graham Spooner, investment research analyst at The Share Centre, picks advertising giant WPP as share of the week.

Although some institutional investors have grave concerns over Sir Martin Sorrell’s pay package, with a third of them voting against his record-breaking £70m remuneration at last week’s AGM, we continue to recommend WPP as its future prospects remain bright.

The advertising giant has had a strong start to the year in the UK and North America, and in a recent trading update it stated that revenue in the first quarter increased by 11% to £4.18bn. It is achieving good growth in its key markets, including Europe, and is also making steady progress in emerging markets, with around 30% of revenue now coming from these countries. The company is set to reap further benefits from the rapid growth of online media, and it could get a real boost this year from landmark events such as the US election, the Rio Olympics and, of course, Euro 2016.

The shares trade on around 14 times 2017 forecast earnings, along with an attractive prospective yield of 3.6%. We suggest new investors drip-feed in the current climate. The growing importance of emerging markets and digital media to the company looks set to continue, allied to improving dividends, earnings momentum and a steady flow of acquisitions.

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