WPP’s (LSE: WPP) reconstruction in the post-Martin Sorrell era has been pretty impressive, so far. Soaring advertising spending in 2021 following last year’s washout has, of course, helped. But news coming out of the FTSE 100 ad agency shows it has beaten expectations by a long chalk. Latest financials showed like-for-like revenues up 15.7% between July and September, much better than an anticipated sub-10% increase.
I’ve always liked WPP because of its huge geographic footprint and its excellent relationship with global blue-chip companies. And I’m encouraged by the agency’s drive to boost its position in the fast-growing digital advertising arena. WPP’s strong balance sheet means it has the firepower to realise its goals too. Earlier this month, it sealed a deal to bring branding and design agency Made Thought into its stable.
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Too cheap to miss?
Today, WPP trades on a forward price-to-earnings growth (PEG) ratio of 0.9. This is inside the widely-regarded benchmark of 1 and suggests a stock could be undervalued. Okay, the FTSE 100 firm’s profits would take a hit if the global economy dives and advertising and marketing go for a bath.
However, for the moment, the outlook for ad-related expenditure looks rock solid. And although WPP’s ultra-low valuation reflects the possibility that earnings forecasts might disappoint, I’d happily buy it today.
A FTSE 100 hero I already own
I already own Ashtead Group (LSE: AHT) shares in my investment portfolio. At current prices, I’m thinking of loading up on some more. Today, the rental equipment play trades on a PEG ratio of just 0.6 for this fiscal year (to April 2022).
Profits at Ashtead have roared back into life this year as the construction industry has picked itself up off the floor. Fresh financials this month showed rental revenues leap 20% in the six months to October, much higher than City analysts had been predicting. Like WPP, Ashtead lifted its full-year expectations in response.
The best blue-chip of the 2010s
I’ve long been a fan of Ashtead and its acquisition-led strategy which has made its Sunbelt brand an industry titan in the US. So has the broader market, which is why Ashtead was the best-performing FTSE 100 stock of the 2010s. According to Refinitiv, someone who invested £1,000 in the business at the start of 2010 would have made a fatty £35,611 by December 2020.
So as an investor myself I’m pleased Ashtead is showing no signs of slowing on the acquisitions front. The rental giant’s spent $748m on M&A since the start of May, with an outlay of $320m in the current quarter alone. The company’s robust balance sheet means it’s been able to invest heavily in its existing operations too. Capital expenditure has totalled around $1.2bn in the financial year to date.
Profits at Ashtead could suffer if President Biden fails to get his infrastructure bill in the US passed. They could also take a hit if supply chain issues persist. Still, all things considered, I think this remains a top FTSE 100 share to buy right now.