Mark Penn, CEO of global agency group Stagwell, believes agency stocks are being undervalued by the market, despite the largest holdcos seeing tumbling prices.
Penn chose to argue with the market as released its FY2025 results, which showed modest top-line growth across revenue, profitability and cash flow.
Stagwell said the growth signals increased momentum as the marketing and communications company doubles down on incorporation of AI and digital transformation.
Total revenue increased 2 per cent year-on-year to US$2.9 billion (AU$4.07 billion), while net revenue rose 6 per cent to US$2.4 billion (AU$3.37 billion).
Excluding Stagwell’s Advocacy segment, which looks after its communications agencies, net revenue rose 9 per cent, driven by digital transformation (13 per cent growth) and marketing services (6 per cent). Its marketing cloud business stood out with 230 per cent year-on-year net revenue increase.
The company secured US$106 million (AU$148 million) in net new business in Q4 and US$476 million (AU$668 million) over the last 12 months. In response, the company has increased its stock repurchase program by US$350 million (AU$491 million), bringing the total available under the program to US$400 million (562 million)
Stagwell is expects continued growth into 2026. They have projected a total net revenue to rise between 8 and 12 per cent.
In an interview with AdAge Penn said: “I think the whole sector is being undervalued, and we’re double undervalued,”
“There’s nothing worse than a good house in a bad neighbourhood.”
In a challenging marketing and communications landscape, Stagwell’s results standout. Many of its heavyweight competitors are struggling to maintain growth with, for instance, WPP Media down 70 per cent in the past 5 years and M+C Saatchi down nearly 30 per cent in the past 5 years.
“We’re just not seeing marketing dead. We’re seeing marketing become, once again, more sophisticated, more complex, more advanced, more interesting,” Penn added.
In an attempt to put its money where its mouth is, Stagwell has launched a $350 million expansion of its share buyback scheme.
Penn described the move as an “aggressive buyback” meant to “back up” Stagwell’s case that its stock is undervalued. “Every investor meeting begins with, ‘Why is your stock so low given your results?’” he said during the company’s earnings call. “The answer is we’re not being valued for the track record and assets we have.”
Stagwell’s revenue gains, increased cash flow and net new business highlight resilience in a sector facing disruption. This performance does suggest that agency stocks may be undervalued. Considering the current marketing climate, Stagwell’s FY2025 results reflect a solid year
Stagwell owns and operates a range of agencies globally, with its largest presence being in the US. In Australia operates agencies including 72andSunny, Assmebly, Allison+Partners, Code and Theory.
