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The FTSE 100 has had its share of wobblers in 2025 and promoting big WPP (LSE: WPP) would possibly simply be one of many greatest.
The corporate’s share value has crashed round 53% over the previous six months to 271.7p as I write on 4 November.
So, is that this a screaming cut price or is the corporate’s low valuation justified in the intervening time?
What’s occurring with the share value?
The corporate has been via a tough patch lately. It posted £14,741m in income for 2024, down barely from the yr earlier than, however warned traders that extra ache may very well be on the best way. Sluggish consumer spending and a harder macro local weather have been weighing closely on progress.
The corporate additionally misplaced some key accounts lately, which hasn’t helped its share value. Analysts have reacted to the latest information by slashing forecasts, and traders have been promoting.
Valuation
On paper, WPP appears to be like low-cost. The present trailing price-to-earnings (P/E) of seven.9 is much under the broader Footsie common and its sector rivals, which regularly commerce on multiples of 20 or extra.
However there’s a motive for that. The entire trade is shifting. Conventional advert company fashions are being disrupted by digital-first gamers, AI instruments, and shoppers taking work in-house.
In its defence, the corporate says it’s adapting. That features extra funding in knowledge, tech and simplification. However the market clearly isn’t satisfied simply but.
The corporate’s debt appears to be like manageable with web borrowings round £1.7bn. Its money stream is stable, highlighted by an 86% conversion fee reported final yr. That offers it some respiratory room moderately than a crushing debt burden.
Nonetheless, low-cost doesn’t all the time imply good worth. If income fall additional, even a low P/E can look dear in hindsight.
My verdict
The corporate is without doubt one of the worst-performing FTSE 100 shares within the final six months. I believe there’s definitely an argument that it may very well be one for worth traders to contemplate.
If WPP can pull off its turnaround, lean into AI and digital providers, and rebuild consumer belief, the shares may bounce again. That low valuation would possibly appear to be a steal if earnings and money stream can considerably improve on the again of a digital- and tech-led transformation.
But when the decline continues, it might take years for the market to regain confidence. That might probably burn traders who’re a little bit too keen to purchase.
So, whereas there’s potential right here, it comes with loads of danger. This might attraction to traders who again restoration tales and don’t thoughts a little bit of volatility. However it’s not one for individuals who favor regular, predictable progress.
For the second, I believe there’s an excessive amount of uncertainty and it’s not one of many Footsie shares on the high of my Purchase checklist.
