As the quickest growing of the entertainment conglomerates with an estimated 21% earnings per share growth rate, the stock trades at a lower price/earnings multiple than its growth rate, but at the high end of the entertainment companies, similar to The Walt Disney Company (NYSE:DIS).
Foreign counterparts
Even so, advertising is no longer just an American game, as companies in growing markets such as India and China are recognizing its importance.
is a provider of media, advertising, and marketing services throughout the Middle East, Africa, and Asia pacific. Spanning most of the countries that do not rely on outside economic support for growth, the company is benefiting from the upswing in advertising.
Over the past 12 months, Omnicom Group Inc. (NYSE:OMC) has generated $1.02 billion cash while it booked net income of $999 million. That means it turned 7.1% of its revenue into free cash flow. Most investors ignore, or worse, don’t keep tabs on their companies’ cash flow. Taking the time to read past the headlines will allow one to not only to spot potential trouble early, but also find the underappreciated home-run stock that might provide a great return.
One Chinese company that recognizes the importance of advertising is Tiger Media, formerly known as SearchMedia Holdings. This is one of China’s leading nationwide multi-platform media companies operating integrated outdoor billboard and in-elevator advertising networks.
Last month, the company acquired eight key lease contracts from Symbol Media, allowing it to take 100% control of the eight key Shanghai shopping center locations. According to China Outdoor Data, the Digital Display LCD/Advertising sector is very attractive, with industry revenue growing 35% from $5.4 billion in 2011 to $7.3 billion in 2012.
Summary
The correction that is taking place in the global economy has created definite opportunities for those ready (and willing) to enter these emerging markets. It is clear the potential withdrawal of central-bank stimulus has allowed investors to be pickier about what they buy.
It is important for investors to embrace countries that have improved their balance sheet and don’t rely on outside funding for growth — namely China and India. And, as consumerism increases, I see these advertising companies in good positions to gain.
Bill Edson has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Bill is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article Emerging Markets: A New Hotbed for Media Investors? originally appeared on Fool.com is written by Bill Edson.
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