Technological advancements and the shift to digital advertising are substantially amplifying growth opportunities for companies operating in the advertising space. Given the backdrop, this article explores the fundamentals of three advertising stocks: Integral Ad Science Holding Corp. (IAS), comScore, Inc. (SCOR), and Publicis Groupe S.A. (PUBGY).
After assessing these stocks, I believe it might be best to steer clear of IAS for now, considering its lackluster fundamentals. However, owning the shares of SCOR and PUBGY could be wise. But before diving deeper into their fundamentals, let’s first briefly take a peek at the industry dynamics.
Advertising serves as a vital pillar for numerous businesses, playing a pivotal role in generating revenue streams. As companies progress and expand their operations, they frequently opt to invest more resources into advertising endeavors in order to achieve various strategic objectives, including enhancing brand recognition, boosting sales figures, and widening market penetration.
According to Statista, global ad spending in the advertising market is projected to reach a remarkable $1.09 trillion this year. Additionally, thanks to the proliferation of online platforms and digital technologies, advertisers are increasingly allocating their budgets toward digital channels. Looking ahead, digital channels are expected to dominate, comprising around 78% of total ad spending by 2028.
Meanwhile, technological advancements such as Artificial Intelligence (AI), machine learning, and big data analytics are transforming the advertising industry in profound ways. AI algorithms can analyze vast amounts of data to identify unique patterns and preferences of individual consumers.
This capacity facilitates the generation of hyper-personalized advertising content crafted to match the interests, behaviors, and demographics of individual users. This targeted precision not only enhances user engagement but also elevates the overall efficacy of advertising campaigns.
Buoyed by the industry’s ability to stay agile and adapt its strategies to remain competitive in an ever-changing landscape, the global advertising market is projected to grow at a 4.6% CAGR spanning 2024 to 2032.
Keeping all these factors in mind, let’s now delve deeper into the fundamentals of the featured Advertising stocks in detail:
Stock to Avoid:
Integral Ad Science Holding Corp. (IAS)
IAS operates as a digital advertising verification company internationally. The company provides IAS Signal, a cloud-based technology platform that offers a return on ad spend needs and delivers independent measurement and verification of digital advertising across devices, channels, desktop, mobile, connected TV, social, display, and video.
IAS’ trailing-12-month net income margin of 1.87% is 47.3% lower than the industry average of 3.55%. Likewise, its trailing-12-month EBIT margin of 3.38% is 59.6% lower than the 8.36% industry average. Furthermore, the stock’s trailing-12-month cash per share of $0.59 is 61.1% lower than the $1.50 industry average.
For the fiscal third quarter, which ended on September 30, 2023, IAS’ revenue amounted to $120.33 million, while its total operating expenses rose 7.2% from the year-ago value to $111.13 million.
Moreover, during the same quarter, the company reported a net loss of $13.75 million and $0.09 per share, respectively. Also, its total comprehensive loss stood at $15.47 million, worsening significantly from the prior year quarter.
Street expects IAS’ EPS for the fiscal fourth quarter (ended December 2023) to decline 38.7% year-over-year to $0.04, while its consensus revenue estimate for the same quarter stands at $131.27 million.
Over the past nine months, the stock has plunged 7.8% to close the last trading session at $15.97.
IAS’ POWR Ratings reflect this bleak outlook. The stock has an overall D rating, translating to a Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a D grade for Value and Momentum. In the 16-stock B-rated Advertising industry, it is ranked #15. Click here to see IAS’ ratings for Growth, Stability, Sentiment, and Quality.
Stocks to Buy:
comScore, Inc. (SCOR)
SCOR operates as an information and analytics company that measures audiences, consumer behavior, and advertising across media platforms internationally. It offers ratings and planning products and services, including Media Metrix Multi-Platform, Mobile Metrix, Video Metrix, and Plan Metrix.
On January 31, 2024, Proximic by Comscore, a SCOR division, unveiled a new U.S. patent for its livestream contextual intelligence technology. This innovative technology enables publishers to enhance monetization of their livestream video inventory and boosts advertiser trust in purchasing livestream media.
Rachel Gantz, the Managing Director of Proximic by Comscore, expressed that the new livestream technology enables advertisers to ensure their ads are placed alongside contextually relevant and brand-safe content for real-time live video.
She emphasized that this technological advancement is particularly timely given the increased importance of contextual targeting in light of signal loss, marking a significant development for live video advertising.
In the same month, SCOR and Nexstar Media Group signed a multi-year deal for cross-platform audience measurement. Through this deal, SCOR will become a key measurement partner for Nexstar, providing critical metrics across its local TV, broadcast, network, and digital businesses.
This expanded partnership aims to offer more precise audience insights to advertisers, optimizing total reach and measuring cross-platform campaigns effectively.
In terms of trailing-12-month assets turnover ratio, SCOR’s 0.69x is 39.7% higher than the 0.49x industry average. Furthermore, the stock’s trailing-12-month cash per share of $6.32 is 320.4% higher than the $1.50 industry average.
For the fiscal third quarter, which ended on September 30, 2023, SCOR’s revenues amounted to $91 million. Its income from operations stood at $2.07 million versus a loss from operations of $56.44 million in the year-ago quarter.
Moreover, the company’s net income came in at $2.62 million, compared to a net loss of $52.38 million in the prior-year quarter. In addition, its adjusted EBITDA rose 14.3% year-over-year to $13.40 million.
Analysts predict SCOR’s revenue and EPS for the fiscal fourth quarter (ended December 2023) to come in at $97.55 million and $0.20, respectively. Furthermore, its EPS is projected to improve by 20% annually over the next five years.
The stock has surged 42.4% over the past three months to close the last trading session at $18.58.
SCOR’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to a Buy in our proprietary rating system.
It has an A grade for Growth and a B for Value. Within the same B-rated industry, it is ranked #4. Click here to see the other ratings of SCOR for Momentum, Stability, Sentiment, and Quality.
Publicis Groupe S.A. (PUBGY)
Headquartered in Paris, France, PUBGY provides marketing, communications, and digital business transformation services internationally. The company offers advisory services for brand strategy, repositioning, and identity under the Publicis Worldwide, Saatchi & Saatchi, Leo Burnett, Marcel, Fallon, and BBH brands. In addition, it offers online advertising services under the Razorfish and Moxie brand names.
PUBGY’s trailing-12-month net income margin of 8.86% is 149.5% higher than the industry average of 3.55%. Its trailing-12-month EBIT margin of 14.90% is 78.3% higher than the 8.36% industry average. Furthermore, the stock’s trailing-12-month levered FCF margin of 12.45% is 58.5% higher than the 7.86% industry average.
In the fiscal year that ended December 31, 2023, PUBGY’s net revenues increased 4.2% year-over-year to €13.10 billion ($14.12 billion), while its operating income stood at €1.74 billion ($1.88 billion).
Moreover, the company’s attributable net income rose 7.4% year-over-year to €1.31 billion ($1.41 billion). Meanwhile, its EPS came in at €5.23, representing an increase of 7.4% from the year-ago value.
The consensus revenue estimate of $14.84 billion for the fiscal year ending December 2024 represents a 5.2% improvement year-over-year. The consensus EPS estimate of $1.99 for the same period reflects a 6.4% year-over-year surge. Moreover, the company topped its revenue estimates in each of the trailing four quarters, which is excellent.
PUBGY’s shares soared 35.8% over the past three months to close the last trading session at $26.01.
It’s no surprise that PUBGY has an overall rating of B, which equates to Buy in our proprietary rating system. It has an A grade for Stability and a B for Sentiment. In the same 16-stock industry, it is ranked #3.
In addition to the POWR Ratings we’ve stated above, we also have PUBGY ratings for Growth, Value, Momentum, and Quality. Get all PUBGY ratings here.
What To Do Next?
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PUBGY shares were trading at $25.78 per share on Tuesday morning, down $0.24 (-0.90%). Year-to-date, PUBGY has gained 11.20%, versus a 4.28% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Mukherjee
Anushka's ultimate aim is to equip investors with essential knowledge that empowers them to make well-informed investment choices and attain sustained financial prosperity in the long run.
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