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3 Stocks to Watch From the Thriving Advertising & Marketing Industry
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The rise in manufacturing and service activities, along with increased digital marketing services and the success of the work-from-home trend, is enabling the Zacks Advertising and Marketing industry to counter the prevailing pandemic-induced challenges. Customer-centric approaches to business, digital strategies and technology investments are helping The Interpublic Group of Companies, Inc. (IPG - Free Report) , Harte Hanks, Inc. (HHS - Free Report) and Direct Digital Holdings, Inc. (DRCT - Free Report) to sail through the current testing times.
About the Industry
The Zacks Advertising and Marketing industry comprises companies that offer an extensive range of services, including advertising, branding, content marketing, digital/direct marketing, digital transformation, financial/corporate business-to-business advertising, graphic arts/digital imaging, healthcare marketing and communications, and in-store design. Prominent players from the industry include The Interpublic Group of Companies and Omnicom. The pandemic will continue to change the way industry players have conducted business and delivered services so far. Currently, the industry’s key focus is on channelizing money and efforts toward media formats and devices. To position themselves suitably in the post-pandemic era, service providers are increasing their efforts toward formulating strategic initiatives and identifying sources of demand.
What's Shaping the Future of the Business Services Industry?
Economic Recovery: The industry is a beneficiary of manufacturing and service activities. Economic activities in both manufacturing as well as service sectors are in the pink. Both the manufacturing PMI and the Services PMI measured by the Institute for Supply Management have stayed above the 50% mark for the past 26 consecutive months, indicating continued expansion.
Reviving Demand: The industry is mature, with demand for services remaining strong over time. Revenues, income and cash flows are anticipated to gradually reach pre-pandemic healthy levels, aiding most industry players in paying out stable dividends.
Digital Marketing Gathering Steam: Amid the pandemic, digital media consumption has shot up, with consumers spending more time on various media platforms and video-streaming services. Thus, agencies offering digital marketing services stand to gain, as these firms are better positioned to address the rapid change in customer preference. According to Magna’s most recent forecast, ad dollars in the United States will reach $320 billion, crossing the $300-billion mark for the first time.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Advertising and Marketing industry, housed within the broader Zacks Business Services sector, currently carries a Zacks Industry Rank #93. This rank places it in the top 37% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates solid near-term growth prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock market performance and current valuation:
Industry's Price Performance
Over the past year, the Zacks Advertising And Marketing industry, the S&P 500 composite and the broader sector witnessed a decline. The industry has depreciated 35.5% compared with the S&P 500 composite’s decline of 13.1% and the broader sector’s 43.2% decline.
One-Year Price Performance
Industry's Current Valuation
On the basis of the forward 12-month price-to-earnings (P/E) ratio, which is commonly used for valuing advertising and marketing stocks, the industry is currently trading at 8.54 compared with the S&P 500’s 17.33 and the sector’s 24.64. Over the past five years, the industry has traded as high as 16.43X, as low as 7.44X, and at the median of 11.97X, as the charts below show.
Price to Forward 12-Month P/E Ratio
3 Advertising Stocks to Watch
We present three stocks that are well positioned for near-term growth:
Harte Hanks: This company provides various multi-channel marketing services in the United States and internationally. Harte Hanks is currently benefiting from its asset-light business model that is helping it to attain operational improvements and generate cash. It continues to invest in people and technology and expand third-party partnerships for revenue expansion.
Harte Hanks carries a Zacks Rank #1, with the Zacks Consensus Estimate for 2022 EPS increasing 31.8% in the past 30 days. Shares of the company have rallied 135% in the past six months.
Price and Consensus: HHS
Direct Digital: The company operates as an end-to-end full-service programmatic advertising platform and offers advertising technology and data-driven campaign optimization solutions. The company’s continuous efforts to expand both buy-side and sell-side advertising have been benefiting its top line as well as operating performance.
Direct Digital currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for 2022 bottom line has increased from a loss of 5 cents to earnings of 41 cents in the past 30 days. Shares of the company have rallied 106% in the past six months.
Price and Consensus: DRCT
Interpublic: With a flexible business model in place, this global provider of advertising and marketing services company has been focusing on its strategic priorities, promptly investing in talent and offerings, and managing operating costs amid the pandemic. It has been enhancing its digital capabilities like search, social, user experience, content creation, analytics and mobile across its portfolio in order to maintain growth in the dynamic sector.
The Zacks Consensus Estimate for the current-year EPS has remained unchanged at $2.71 in the past 30 days. Shares of the company have declined 19.5% in the past six months. Interpublic currently carries Zacks Rank #3 (Hold).
Price and Consensus: IPG
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3 Stocks to Watch From the Thriving Advertising & Marketing Industry
The rise in manufacturing and service activities, along with increased digital marketing services and the success of the work-from-home trend, is enabling the Zacks Advertising and Marketing industry to counter the prevailing pandemic-induced challenges. Customer-centric approaches to business, digital strategies and technology investments are helping The Interpublic Group of Companies, Inc. (IPG - Free Report) , Harte Hanks, Inc. (HHS - Free Report) and Direct Digital Holdings, Inc. (DRCT - Free Report) to sail through the current testing times.
About the Industry
The Zacks Advertising and Marketing industry comprises companies that offer an extensive range of services, including advertising, branding, content marketing, digital/direct marketing, digital transformation, financial/corporate business-to-business advertising, graphic arts/digital imaging, healthcare marketing and communications, and in-store design. Prominent players from the industry include The Interpublic Group of Companies and Omnicom. The pandemic will continue to change the way industry players have conducted business and delivered services so far. Currently, the industry’s key focus is on channelizing money and efforts toward media formats and devices. To position themselves suitably in the post-pandemic era, service providers are increasing their efforts toward formulating strategic initiatives and identifying sources of demand.
What's Shaping the Future of the Business Services Industry?
Economic Recovery: The industry is a beneficiary of manufacturing and service activities. Economic activities in both manufacturing as well as service sectors are in the pink. Both the manufacturing PMI and the Services PMI measured by the Institute for Supply Management have stayed above the 50% mark for the past 26 consecutive months, indicating continued expansion.
Reviving Demand: The industry is mature, with demand for services remaining strong over time. Revenues, income and cash flows are anticipated to gradually reach pre-pandemic healthy levels, aiding most industry players in paying out stable dividends.
Digital Marketing Gathering Steam: Amid the pandemic, digital media consumption has shot up, with consumers spending more time on various media platforms and video-streaming services. Thus, agencies offering digital marketing services stand to gain, as these firms are better positioned to address the rapid change in customer preference. According to Magna’s most recent forecast, ad dollars in the United States will reach $320 billion, crossing the $300-billion mark for the first time.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Advertising and Marketing industry, housed within the broader Zacks Business Services sector, currently carries a Zacks Industry Rank #93. This rank places it in the top 37% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates solid near-term growth prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock market performance and current valuation:
Industry's Price Performance
Over the past year, the Zacks Advertising And Marketing industry, the S&P 500 composite and the broader sector witnessed a decline. The industry has depreciated 35.5% compared with the S&P 500 composite’s decline of 13.1% and the broader sector’s 43.2% decline.
One-Year Price Performance
Industry's Current Valuation
On the basis of the forward 12-month price-to-earnings (P/E) ratio, which is commonly used for valuing advertising and marketing stocks, the industry is currently trading at 8.54 compared with the S&P 500’s 17.33 and the sector’s 24.64. Over the past five years, the industry has traded as high as 16.43X, as low as 7.44X, and at the median of 11.97X, as the charts below show.
Price to Forward 12-Month P/E Ratio
3 Advertising Stocks to Watch
We present three stocks that are well positioned for near-term growth:
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Harte Hanks: This company provides various multi-channel marketing services in the United States and internationally. Harte Hanks is currently benefiting from its asset-light business model that is helping it to attain operational improvements and generate cash. It continues to invest in people and technology and expand third-party partnerships for revenue expansion.
Harte Hanks carries a Zacks Rank #1, with the Zacks Consensus Estimate for 2022 EPS increasing 31.8% in the past 30 days. Shares of the company have rallied 135% in the past six months.
Price and Consensus: HHS
Direct Digital: The company operates as an end-to-end full-service programmatic advertising platform and offers advertising technology and data-driven campaign optimization solutions. The company’s continuous efforts to expand both buy-side and sell-side advertising have been benefiting its top line as well as operating performance.
Direct Digital currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for 2022 bottom line has increased from a loss of 5 cents to earnings of 41 cents in the past 30 days. Shares of the company have rallied 106% in the past six months.
Price and Consensus: DRCT
Interpublic: With a flexible business model in place, this global provider of advertising and marketing services company has been focusing on its strategic priorities, promptly investing in talent and offerings, and managing operating costs amid the pandemic. It has been enhancing its digital capabilities like search, social, user experience, content creation, analytics and mobile across its portfolio in order to maintain growth in the dynamic sector.
The Zacks Consensus Estimate for the current-year EPS has remained unchanged at $2.71 in the past 30 days. Shares of the company have declined 19.5% in the past six months. Interpublic currently carries Zacks Rank #3 (Hold).
Price and Consensus: IPG