Outfront Media Inc. (OUT, Financial) is one of the few traditional advertising companies that have managed to implement seamless integration of modern advertising techniques into their business models. This New York-based marketing services provider has embraced change with unparalleled finesse.
The company has strategically integrated modern marketing techniques, including social media and mobile, into its traditional billboard marketing to become one of the most attractive stocks in the marketing services industry. Outfront Media’s top line experienced slow growth over the last several years, averaging a growth rate of less than 5% year over year.
However, in 2019, the company’s top line is expected to achieve double-digit revenue growth after posting 10% year-over-year growth in the first quarter, a 14.49% increase in the second quarter and a 44% gain in the third quarter. Outfront Media appears to be entering into a promising growth phase after spending the last few years adapting its business model to industry changes.
The stock soared nearly 4% on Monday to trade at $30.82 after analysts from JPMorgan Chase (JPM, Financial) upgraded it to overweight with a price target of $38, which was an improvement from $28.
The upgrade followed the company’s latest partnership announcement, which includes an initial 10-year extension to its advertising franchise with Washington Metropolitan Area Transit Authority ("WMATA") starting July 2020.
Outfront Media also announced a new partnership with REIT giant RioCan (TSX:REI.UN, Financial) to create high-tech advertising installations in the reimagined Yonge Sheppard Centre. The company has leveraged the latest technologies to provide advertisers with valuable data on traffic. It has installed an engaging beacon technology-supported network of digital screens at the Yonge Sheppard Centre.
Outfront Media’s mission is to become the preferred choice of advertisers looking for cross-platform brand development, which covers billboard marketing, social media and mobile. With these services, companies will easily be able to implement omnichannel marketing, thereby reaching their target audience with a uniform message.
The company's evolved business model fits in well with the demands of modern marketing. In order to build successful brand strategies, businesses must integrate traditional marketing platforms like billboards with social media and mobile. Ignoring outdoor advertising could be as costly as staying away from social media, according to Jess Munday, owner of Custom Neon, an outdoor design company that specializes in neon signs.
In a report about the latest advertising trends published at the end of last month by eConsultancy, about 49% of of young people said that they would be interested in seeing more real-time content on outdoor screens. This just shows how billboard advertising continues to play a crucial role in modern marketing. Outfront Media’s ability to provide real-time data on traffic to its clients will be significant in the company’s strategy to stay ahead of the competition.
From a valuation perspective, the forward 12-month price-earnings ratio of 23.88 is significantly better than the price-earnings ratio of its closest peer, Quotient Technologies Inc. (QUOT), which stands at -48.45. And even when we factor in the expected five-year growth, Outfront's price-earnings to growth ratio of 4.19 still appears more attractive when compared to Quotient's -1.25.
In summary, Outfront Media appears to be turning a corner, which could launch its next growth phase in an exciting market.
Disclosure: No positions.
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