WPP (LSE: WPP) was once a FTSE 100 champion, but it’s been through a tough patch and the share price has slumped in 2025. In fact, shareholders have had a disappointing five years.
There’s no denying it can be risky investing in a company whose business is under pressure. But at the same time, a depressed share price can also mean a great recovery opportunity.
Looking at valuations and forecasts, I think there’s a strong chance of WPP bouncing back in the next few years. Let me explain why.
Interim results
At first-half results time in August, CEO Mike Read admitted to “a challenging first half given pressures on client spending and a slower new business environment“. But he also spoke of “significant progress on the repositioning of WPP Media, simplifying its organisational model to increase effectiveness and reduce costs“.
So the company is in a cost-reduction phase. That can be a key step when a current business model is losing profitability and a refocus is needed.
The half brought a 7.8% decline in reported revenue, which didn’t surprise me. But like-for-like revenue dipped only 2.4%, which I find encouraging.
Paying a dividend
The company declared a 7.5p interim dividend. That’s only half the 15p paid at the same stage in 2024. But I thought there’d be a fair chance of the dividend being suspended altogether to save costs.
Forecasts actually suggest a 6.8% dividend yield for the full year, high by FTSE 100 standards. So there was clearly room for something more drastic. And I reckon we could still see a bigger cut by year-end.
That we saw any dividend at all suggests the board is far from being in panic mode. And City analysts are predicting a turnaround starting in 2026.
Pivot year
Will 2025 prove to be the turning point in WPP’s turnaround plans? Forecasts show earnings per share dropping 10% for the 2025 full year. But they see them creeping up again — by 3.6% in 2026, and another 12.5% in 2027.
Forecasts are often wrong. And if business doesn’t improve in 2026 the way the brokers — and the company — think it will, we might see further share price falls.
But I think the current valuation exaggerates the risk, and doesn’t fairly value WPP’s upbeat chances of recovery.
There’s a forecast price-to-earnings (P/E) ratio of 7.7 for the current year, close to half the FTSE 100 average. And it would drop to as low as 6.6 by 2027 if forecasts are accurate — with earnings making a comeback and comfortably covering prospective dividends.
My verdict
For me, a recovery buy depends on a few key questions. Do I see a long-term quality company? For WPP that’s a yes. Do forecasts look good? We’ve already seen the positive answer to that.
Is there enough safety margin in the valuation? For a company like this, that low P/E coupled with upbeat earnings and dividend forecasts make me think there is — in line with my personal risk tolerance, at least.
Others will judge things differently. But WPP is surely a recovery stock worth considering, isn’t it? I’m thinking of it as a potential buy for my ISA.
