Is WPP plc (LON:WPP) Potentially Undervalued?

Today we're going to take a look at the well-established WPP plc (LON:WPP). The company's stock saw significant share price movement during recent months on the LSE, rising to highs of UK£9.67 and falling to the lows of UK£8.08. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether WPP's current trading price of UK£8.08 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at WPP’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for WPP

What's The Opportunity In WPP?

Good news, investors! WPP is still a bargain right now. According to my valuation, the intrinsic value for the stock is £12.70, but it is currently trading at UK£8.08 on the share market, meaning that there is still an opportunity to buy now. However, given that WPP’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will WPP generate?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. WPP's earnings over the next few years are expected to increase by 72%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? Since WPP is currently undervalued, it may be a great time to increase your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.

Are you a potential investor? If you’ve been keeping an eye on WPP for a while, now might be the time to make a leap. Its prosperous future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy WPP. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed buy.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. To help with this, we've discovered 2 warning signs (1 is potentially serious!) that you ought to be aware of before buying any shares in WPP.

If you are no longer interested in WPP, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.