Rising manufacturing and service businesses, along with the rise of digital marketing services and the success of the work-from-home trend, are enabling Zacks’ advertising and marketing industry to counter current challenges. related to the pandemic.
Customer-centric business approaches, digital strategies and technology investments help Publicis Groupe SA PUBG, Gambling.com Group Limited GAMB and Harte Hanks, Inc. HHS to navigate through current test times.
About the industry
The Zacks advertising and marketing industry includes companies that provide a wide range of services, including advertising, branding, content marketing, digital/direct marketing, digital transformation, business-to-business advertising financial/corporate, graphic arts/digital imaging, healthcare marketing and communications, and in-store design services. Major players in the industry include The Interpublic Group of Companies and Omnicom. The pandemic will continue to change the way industry players have conducted business and provided services so far. Currently, the industry’s main focus is channeling money into media formats and devices. To position themselves appropriately in the post-pandemic era, service providers are redoubling their efforts to formulate strategic initiatives and identify sources of demand.
What is shaping the future of the business services industry?
Economic recovery : Industry benefits from manufacturing and service activities. Economic activities, both in the manufacturing sector and in the service sector, are in the pink. The manufacturing PMI and services PMI as measured by the Institute for Supply Management have remained above the 50% mark for the past 29 consecutive months, indicating continued expansion.
Relaunch of the request: The industry is mature, with demand for services remaining strong over time. Revenues, revenues and cash flow should gradually reach healthy levels before the pandemic, helping most players in the sector to pay stable dividends.
Digital marketing brings together Steam:Amid the pandemic, digital media consumption has skyrocketed as consumers spend more time on various media platforms and video streaming services. Thus, agencies offering digital marketing services have everything to gain, as these companies are better positioned to deal with rapidly changing customer preferences. According to Magna’s latest forecast, advertising dollars in the United States will reach $323 billion in 2022, crossing the $300 billion mark for the first time.
Zacks’ Industry Rankings Indicate Bright Prospects
The Zacks Advertising and Marketing industry, housed within the broader Zacks Business Services sector, currently carries the Zacks Industry Rank #84. This ranking places it in the top 33% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is essentially the average of the Zacks ranking of all member stocks, indicates strong near-term growth prospects. Our research shows that the top 50% of industries ranked by Zacks outperform the bottom 50% by a factor of more than 2 to 1.
Before outlining a few stocks you might consider for your portfolio, let’s take a look at recent stock market performance and the current valuation of the sector:
Industry price performance
Over the past year, the Zacks advertising and marketing industry, the S&P 500 composite, and the broader sector have seen declines. The industry fell 26.7% compared to the 15.9% decline in the S&P 500 composite and the 40.2% decline in the broader sector.
Year-over-year price performance
Current industry assessment
Based on the 12-month forward price-to-earnings (P/E) ratio, which is commonly used to value advertising and marketing stocks, the industry is currently trading at 11.38 versus 17.33 for the S&P 500 and 24.57 for the sector. Over the past five years, the industry has traded as low as 16.43X, as low as 7.44X and at the median of 11.97X, as seen in the charts below.
12 month price/earnings ratio
3 advertising actions to consider
Here we present three stocks well positioned for near-term growth:
Gambling.com: This performance marketing company for the online gaming industry offers digital marketing services for iGaming and sports betting. The company has a strong operating model that helps it deliver healthy margins and consistent free cash inflows. It improved its pricing power by increasing the number of new depositing customers.
Gambling.com currently carries a Zacks Rank #1 (Strong Buy). The Zacks consensus estimate for 2022 is up 38.9% over the past 60 days. Shares of the company are up 28.9% over the past six months. You can see the complete list of Zacks #1 of the day shares here.
Pricing and Consensus: GAMB
Publicis SA Group: The company is a provider of marketing, communications and digital business transformation services. It is currently experiencing strength in all regions, particularly in the United States and Europe, thanks to strong momentum in winning accounts.
Publicis also carries a Zacks Rank #1. The Zacks consensus estimate for current-year EPS is up 10.3% over the past 60 days. Shares of the company have gained 20.2% over the past six months.
Pricing and Consensus: PUBGY
Hart 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 which is helping it achieve operational improvements and generate cash. It continues to invest in sales, marketing, technology and partnerships for sustainable growth.
Harte Hanks wears a Zacks rank #2 (purchase). The Zacks Consensus Estimate for 2022 EPS has remained unchanged for the past 60 days. Shares of the company are up 24.9% over the past six months.
Pricing and Consensus: HHS
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Publicis Groupe SA (PUBGY): Free Inventory Analysis Report
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