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Omnicom Group Inc. (OMC), Interpublic Group of Companies Inc (IPG): Why You Should Put This Stock on Your Watch List

Competition is one notch lower

Interpublic Group of Companies Inc (NYSE:IPG) and WPP plc – American Depositary Shares each representing five Ordinary Shares (NASDAQ:WPPGY)  are not without their own advantages. Interpublic Group of Companies Inc (NYSE:IPG)’s McCann Worldgroup is regarded as one of the most creative agencies in the world. Meanwhile, WPP plc – American Depositary Shares each representing five Ordinary Shares (NASDAQ:WPPGY)’s head start in Asian markets allows it to earn a temporary windfall as competitors scramble to catch up. But neither company has Omnicom’s trifecta of world-renowned ad agencies that attracts and retains customers based on reputation alone.

In fact, Interpublic Group of Companies Inc (NYSE:IPG) and WPP plc – American Depositary Shares each representing five Ordinary Shares (NASDAQ:WPPGY) have problems of their own. Interpublic Group of Companies Inc (NYSE:IPG)’s failure to integrate past acquisitions has led many analysts to question whether the company will ever improve its margins to previous levels. WPP plc – American Depositary Shares each representing five Ordinary Shares (NASDAQ:WPPGY) has also made expensive acquisitions — something that Omnicom’s management is universally praised for avoiding. In addition, the mature advertising industry will make large market share grabs near impossible, ensuring that the status quo will persist with Omnicom on top, save for further value-destroying acquisitions by Interpublic Group of Companies Inc (NYSE:IPG) and WPP plc – American Depositary Shares each representing five Ordinary Shares (NASDAQ:WPPGY).

Bottom line

Omnicom is top dog in the advertising business. It earns stable and reliable profits, and management makes sensible acquisitions. At 16 times earnings, the stock is fairly priced. But a market crash could cause that multiple to drop precipitously overnight — and patient investors can cash in when that happens.


Ted Cooper has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.
Ted is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Why You Should Put This Stock on Your Watch List originally appeared on Fool.com is written by Ted Cooper.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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