Our takeaway from Best Idea WPP’s (WPP) analyst day was positive, as the narrow-moat firm appears to be taking the right steps to return to organic growth in North America and expand overall margins. Under the leadership of Mark Read, the firm is taking the route that its peers have already taken--integrating technology know-how with the differentiating creativity expertise. WPP also provided some color on the impact of its strategy two to three years down the road. By the end of 2021, the firm expects organic growth to return to levels of its peers (from organic decline this year) and operating margin to hit nearly 15%, up from our 2018 and 2019 estimates of 11% and 10%, respectively. While these figures are above our 2021 projections, we did not make any adjustments to our model, as we believe risks related to WPP’s client mix remain. Our long-term positive view on the firm has not changed, and we are maintaining our GBX 1,450 per share fair value estimate. While investing in this turnaround name requires patience, we continue to view WPP shares as attractive given the current 0.58 price/fair value. We must also note that, in line with our assumption, WPP’s dividend appears to be safe as the firm said it is committed to maintain it at current levels, which is yielding 7%.
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Ali Mogharabi does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies.