Global advertising agency WPP PLC (LON:WPP) is inexpensive considering the growth prospects, according to Barclays Capital.
Barclays likes the agency business model of WPP and believes it has the potential to deliver double digit percentage growth in earnings per share (EPS) over multiple years.
The media team at Barclays notes that WPP has delivered 2.8% organic revenue and 10% EPS compound annualised growth rates over the last 10 years, which is “a full cycle including a recession”.
In Barclays’ view, the business model warrants a 10-15% premium over the sector peers, because of the EPS growth it has delivered over the years.
“We argue that WPP is inexpensive for the growth offered and that investors are not giving WPP’s business model and management’s execution enough credit.
“We think WPP should be a core holding for long-term investors. WPP is our European media top pick,” Barclays said.
It has an ‘overweight’ recommendation on the stock and 2,200p price target.
Shares currently trade at 1,850p.