Stagwell Inc (NASDAQ: STGW)

Sector: Communication Services Industry: Advertising Agencies CIK: 0000876883
Market Cap 1.17 Bn
P/B 1.56
P/E 59.25
P/S 0.40
ROIC (Qtr) 4.15
Div Yield % 0.00
Rev 1y % (Qtr) 4.46
Total Debt (Qtr) 1.81 Bn
Debt/Equity (Qtr) 2.42
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About

Stagwell Inc. (STGW) operates in the marketing industry, delivering scaled creative performance for ambitious brands worldwide. The company connects creativity with leading-edge technology, harmonizing the art and science of marketing. With a global network of around 13,000 employees, Stagwell serves over 4,000 blue-chip clients. Stagwell operates in a highly competitive and fragmented industry, contending with global holding companies, consultancies, tech platforms, media companies, and other services firms. The company's capabilities span five...

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Investment thesis

Bull case

  • Healthy cash reserves of 132.24M provide 2.33x coverage of short-term debt 56.77M, demonstrating strong liquidity position and minimal refinancing risk.
  • Operating cash flow of 242.80M provides exceptional 24.34x coverage of minority interest expenses 9.97M, showing strong core operations.
  • Robust free cash flow of 153.19M exceeds capital expenditure of 89.61M by 1.71x, indicating strong organic growth funding capability.
  • Cash position of 132.24M provides exceptional 13.26x coverage of minority interest expenses 9.97M, indicating strong liquidity.
  • Free cash flow of 153.19M provides solid 0.92x coverage of operating expenses 166.87M, showing operational efficiency.

Bear case

  • Operating cash flow of 242.80M barely covers its investment activities of (176.75M), with a coverage ratio of -1.37, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Cash reserves of 132.24M provide limited coverage of acquisition spending of (85.65M), which is -1.54x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
  • Operating cash flow of 242.80M provides insufficient coverage of deferred revenue obligations of 375.77M, which is 0.65x, raising concerns about future service delivery capabilities.
  • The company's operating cash flow of 242.80M shows concerning coverage of stock compensation expenses of 57.38M, with a 4.23 ratio indicating potential earnings quality issues.
  • Operating earnings of 133.41M show weak coverage of depreciation charges of 234.68M, with a 0.57 ratio indicating high capital intensity and potential reinvestment needs.

Segments Breakdown of Revenue (2024)

Product and Service Breakdown of Revenue (2024)

Peer comparison

Companies in the Advertising Agencies
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 APP AppLovin Corp 127.41 Bn 45.02 23.08 3.51 Bn
2 OMC Omnicom Group Inc. 14.77 Bn 15.35 1.09 7.07 Bn
3 TTD Trade Desk, Inc. 12.45 Bn 28.38 4.46 0.38 Bn
4 WPP WPP plc 3.86 Bn 7.39 0.20 -
5 QMMM QMMM Holdings Ltd 1.98 Bn -702.35 1,054.15 -
6 MGNI Magnite, Inc. 1.64 Bn 28.22 2.33 0.63 Bn
7 CCO Clear Channel Outdoor Holdings, Inc. 1.41 Bn -238.00 1.35 6.46 Bn
8 ZD Ziff Davis, Inc. 1.31 Bn 11.84 0.90 0.87 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 0.64 12.80
EV to Cash from Ops. EV/CFO 11.27 -9.24
EV to Debt EV to Debt 1.51 865.17
EV to EBIT EV/EBIT 20.52 -23.35
EV to EBITDA EV/EBITDA 7.19 -13.82
EV to Free Cash Flow [EV/FCF] EV/FCF 17.87 -15.99
EV to Market Cap EV to Market Cap 2.35 -11.05
EV to Revenue EV/Rev 0.95 29.66
Price to Book Value [P/B] P/B 1.56 18.02
Price to Earnings [P/E] P/E 59.25 -21.31
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 0.00 111.99
Dividend Payout Ratio % Div Payout % (Qtr) 0.00 6.00
Dividend per Basic Share Div per Share (Qtr) 0.00 0.13
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 0.00 13.23
Interest Coverage Int. cover (Qtr) 1.39 -127.87
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -89.73 -7,492.41
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) -9.31 58.50
Dividend Growth (1y) % Div 1y % (Qtr) 0.00 6.50
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 7,423.49 161.56
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 13.99 -120.45
EBIT Growth (1y) % EBIT 1y % (Qtr) -2.25 -65.24
EBT Growth (1y) % EBT 1y % (Qtr) -17.53 -164.00
EPS Growth (1y) % EPS 1y % (Qtr) 0.00 12.86
FCF Growth (1y) % FCF 1y % (Qtr) 66.35 -627.41
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 10.39 -10.90
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.68 0.88
Cash Payout Ratio Cash Payout (Qtr) 0.00 0.05
Cash Ratio Cash Ratio (Qtr) 0.10 0.60
Current Ratio Curr Ratio (Qtr) 0.89 2.20
Debt to Equity Ratio Debt/Equity (Qtr) 2.42 -1.37
Interest Cover Ratio Int Coverage (Qtr) 1.39 -127.87
Times Interest Earned Times Interest Earned (Qtr) 1.39 -127.87
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 12.70 -7.55
EBIT Margin % EBIT Margin % (Qtr) 4.62 -208.19
EBT Margin % EBT Margin % (Qtr) 1.29 -119.23
Gross Margin % Gross Margin % (Qtr) 36.20 41.53
Net Profit Margin % Net Margin % (Qtr) 0.70 -119.40