The Best Advertising Stock to Buy in Q4 and the Worst
High inflation and the Fed’s subsequent aggressive interest rate hikes to tame it have led to heightened volatility in the stock market this year. However, as recent data indicate inflation is cooling down, the Fed is expected to slow the pace of its rate hikes.
On the other hand, the United States has the world’s largest advertising market. An estimated $566 billion will be spent on digital advertising worldwide in 2022, with this figure expected to rise rapidly in the coming years. Digital advertising income will exceed $700 billion by 2025.
Furthermore, according to Research and Market report, the global digital advertising and marketing industry is expected to reach $786.2 billion by 2026, growing at a 13.9% CAGR.
Given this backdrop, fundamentally strong advertising stock Transcontinental Inc. (TCLAF) might be a great buy now. However, the fundamentally weak stock Troika Media Group, Inc. (TRKA) might be best avoided.
Stock to Buy:
Transcontinental Inc. (TCLAF)
Headquartered in Montreal, Canada, TCLAF is a flexible packaging company with operations in Canada, the United States, Latin America, the United Kingdom, Australia, and New Zealand. It engages in the packaging, printing, and media industries.
In terms of forward EV/EBITDA, TCLAF is currently trading at 6.05x, 11.9% lower than the industry average of 6.87x. Its forward EV/Sales multiple of 0.87 is 41.24% lower than the industry average of 1.48.
TCLAF’s revenues increased 20.3% year-over-year to C$747.8 million ($556.59 million) for the third quarter that ended July 31, 2022. Its net earnings increased 21.4% year-over-year to C$34.1 million ($25.38 million). Also, its EPS increased 21.9% year-over-year to $0.39.
Street expects TCLAF’s revenue to increase 11.4% year-over-year to $2.21 billion in 2022. It surpassed EPS estimates in three of four trailing quarters. TCLAF has gained marginally intraday to close the last trading session at $11.71.
TCLAF has an overall B rating, which equates to a Buy in our POWR Ratings systems. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
TCLAF has a B for Value, Momentum, and Stability. Within the Advertising industry, it is ranked #3 out of 19 stocks. Click here to see the additional POWR Ratings for Sentiment, Growth, and Quality for TCLAF.
Stock to Avoid:
Troika Media Group, Inc. (TRKA)
TRKA, a professional services company, provides consulting and solution services worldwide. It offers brand building and activation, marketing innovation and enterprise technology, performance and customer acquisition, internal and external creative, technical, or media-based resources, third-party advertising technology solutions, proprietary business intelligence systems, data delivery systems, and other key services.
TRKA’s trailing-12-month Net Income Margin of negative 15.48% is lower than the 4.46% industry average. Its trailing-12-month EBITDA margin of negative 0.90% is lower than the 17.84% industry average.
TRKA’s total operating expenses came in at $12.47 billion for the third quarter that ended September 30, 2022, up 78.1% year-over-year. Its other long-term liabilities came in at $226.95 million for the period ended September 30, 2022, compared to $74.91 million for the period ended June 30, 2021.
Over the past year, the stock has lost 85.2% to close the last trading session at $0.23.
TRKA’s POWR Ratings reflect its poor prospects. The stock's overall D rating equates to a Sell in our proprietary rating system. It also has a D grade for Growth, Stability, and Value. The stock is ranked last in the same industry.
We’ve also rated TRKA for Sentiment, Quality, and Momentum. Get all TRKA ratings here.
TCLAF shares were trading at $11.71 per share on Monday afternoon, up $0.03 (+0.21%). Year-to-date, TCLAF has declined -27.13%, versus a -15.37% rise in the benchmark S&P 500 index during the same period.