In This Article:
- By GF Value
The stock of The Interpublic Group of (NYSE:IPG, 30-year Financials) gives every indication of being significantly overvalued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $32.93 per share and the market cap of $13 billion, The Interpublic Group of stock appears to be significantly overvalued. GF Value for The Interpublic Group of is shown in the chart below.
Because The Interpublic Group of is significantly overvalued, the long-term return of its stock is likely to be much lower than its future business growth, which averaged 0.4% over the past five years.
Link: These companies may deliever higher future returns at reduced risk.
Investing in companies with poor financial strength has a higher risk of permanent loss of capital. Thus, it is important to carefully review the financial strength of a company before deciding whether to buy its stock. Looking at the cash-to-debt ratio and interest coverage is a great starting point for understanding the financial strength of a company. The Interpublic Group of has a cash-to-debt ratio of 0.39, which is worse than 68% of the companies in the industry of Media - Diversified. GuruFocus ranks the overall financial strength of The Interpublic Group of at 4 out of 10, which indicates that the financial strength of The Interpublic Group of is poor. This is the debt and cash of The Interpublic Group of over the past years:
Investing in profitable companies carries less risk, especially in companies that have demonstrated consistent profitability over the long term. Typically, a company with high profit margins offers better performance potential than a company with low profit margins. The Interpublic Group of has been profitable 10 years over the past 10 years. During the past 12 months, the company had revenues of $9 billion and earnings of $1.1 a share. Its operating margin of 13.07% better than 78% of the companies in the industry of Media - Diversified. Overall, GuruFocus ranks The Interpublic Group of's profitability as fair. This is the revenue and net income of The Interpublic Group of over the past years: