Stagwell (STGW), mcap=$2732m

STGW pitch:
– Stagwell manages an integrated network of top-tier ad agencies and assets for blue-chip companies.
– The unfortunate timing of the secondary offering to PE owners pushed STGW shares down after a solid Q4 print, creating the current opportunity.
– High growth, high cash flow generative enterprise with best-of-class management.
– 57% of revenue and over 50% of EBITDA oriented toward digital transformation.
– 10-14% 2023E annual revenue growth, ~2x that of traditional advertising companies.
– Cheap on an absolute and relative basis with superior growth and margin characteristics.
– Trades at 7x fwd. EBITDA, 6x P/E and a 14% FCF yield.
– Higher growth-oriented marketing services / ad tech comps trade 10-13x EV / EBITDA.

STGW valuation:
– At a minimum, STGW should trade at an 8-10x EBITDA or 8-10% FCF yield implying a $9-11/share price target.
– Longer-term target $15-18/share and STGW continues to outpace the growth of the industry.

Exp. gain: 30-60%

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