Is STGW a good stock to buy?We came across a bullish thesis on Stagwell Inc. on One Idea Per Day's Substack by Paul. The thesis was published on July 13th, when the stock was trading at $7.87, and STGW has gained 10.29% since then. The move appears to reflect investor optimism about Stagwell's AI and digital transformation strategy, extending the recovery since April. In this article, we will summarize the bulls' thesis on STGW. Stagwell Inc.'s share was trading at $8.68 as of October 26th 2026. STGW's trailing and forward P/E were 149.83 and 6.42 respectively according to Yahoo Finance.
This isn't the first time we see a marketing services company pitched as a great investment. STGW shares gained 80.46% over the last 12 months. Comparable stocks like Omnicom Group and Cognizant Technology Solutions gained 3.78% and 2.24%, respectively, during the same period. STGW's stronger rally may partly reflect improving earnings expectations, with the company raising its full-year adjusted earnings outlook after second-quarter revenue grew 11%. Why are marketing and technology services stocks rising, and does STGW still offer upside after pulling so far ahead?
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In April, we published an article about the 10 Most Undervalued Stocks Under $10 to Buy Right Now and STGW ranked #10 in that article. STGW returned 38.43% since then, turning an overlooked pick into a rewarding investment. So, hedge funds were right about STGW. This article explores whether Stagwell's AI bet is enough to change the story for STGW. Before getting into our analysis, let's take a look at the business and why some investors like the stock so much.
Stagwell Inc (NASDAQ:STGW) provides marketing services and data-driven solutions through a network of agencies focused on creative work, digital transformation, media, and technology-enabled marketing. Bulls argue that the market still values Stagwell like a traditional advertising agency, while the business is actually evolving into a challenger network with stronger growth potential.
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In the first quarter of 2026, revenue rose 8% year over year to $704 million, and adjusted earnings per share came in at $0.17. The stock trades at roughly 7 times forward earnings, with a market value of about $1.94 billion. That low multiple suggests investors aren't paying for today's earnings alone, they are betting on Stagwell's ability to grow its earnings toward roughly $700 million by 2028.
The bullish case is built on Stagwell taking market share from traditional advertising holding companies by blending creative services with digital tools, technology, and data analytics. Its unusual corporate structure, including a dual-class share setup and a tax-related payment agreement, has made some investors cautious, which bulls believe explains why the stock trades cheaply despite improving results. Recent numbers support the bullish view: Stagwell added a record $141 million in new business during the first quarter, bringing new business won over the past year to $486 million.
The clearest sign of progress is Stagwell's new partnership with IBM, which named Stagwell its lead creative partner on June 30, ending IBM's roughly 32-year relationship with WPP's Ogilvy. Winning an account of that size shows Stagwell can compete with much larger advertising groups for major corporate clients. If that relationship grows and other big companies follow suit, it would support the idea that Stagwell can keep taking business from older, larger agencies.
Looking ahead, management expects revenue to grow 8% to 12% in 2026, with adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $475 million to $525 million and adjusted earnings per share of $0.98 to $1.12. The company also expects to convert 50% to 60% of that EBITDA into free cash flow, which works out to roughly $240 million to $315 million, a meaningful sum relative to its $1.94 billion market value. One investor named Wyden goes further, arguing the stock could eventually offer a free cash flow yield above 20%, though that view depends on Stagwell's earnings growing all the way to its 2028 target rather than simply meeting near-term guidance (see whether Stagwell's healthcare expansion can support durable profitability ).
The biggest risk to this story is a slowdown in advertising spending. For the turnaround to work, Stagwell needs to show steadily improving growth and profitability, but the agency business is one where key employees and client relationships can walk out the door. Artificial intelligence adds another layer of uncertainty, since it could make creative and marketing work faster and cheaper to produce, which may reduce how much agencies can charge clients over time. Whether AI ends up helping Stagwell's technology-driven approach or squeezing its pricing power is still an open question.
Another risk for the stock is the cost of meeting payments tied to past acquisitions. Buying agencies expands Stagwell's capabilities, but it also creates obligations that can absorb future cash. Stagwell owes deferred payments on some acquisitions, while certain minority owners can require it to buy their remaining stakes. These payments can exceed estimates if the acquired businesses perform better than expected. Meeting them could leave less cash for buybacks or investment in the business. These obligations could limit shareholder returns even if earnings continue growing. In our opinion, the stock's discount could persist if acquisition payments leave investors with less available cash than the projected free cash flow yield suggests.
There are also concerns unrelated to advertising trends. Stagwell's dual-class share structure and tax agreement make some institutional investors wary, and the stock has already bounced back significantly from its 52-week low of $4.29. Going forward, investors will be watching whether Stagwell can keep up the pace of new business wins it posted in the first quarter and whether growth holds up through the rest of the year.
Hedge fund positioning shows a mixed signal. As per our database, 12 hedge fund portfolios held Stagwell Inc at the end of the second quarter, down from 17 in the previous quarter. That decline points to institutional investors staying cautious on the stock even after the IBM win and stronger financial results, suggesting big money managers are still waiting for more proof before committing. In contrast, Omnicom Group (NYSE:OMC) was held by 45 hedge fund portfolios, up from 38, Accenture (NYSE:ACN) was held by 69 hedge fund portfolios, up from 64, while Cognizant Technology Solutions (NASDAQ:CTSH) saw ownership dip slightly to 48 hedge fund portfolios, down from 50. Overall, hedge funds have been adding to larger, more established marketing and technology-services companies while keeping their distance from Stagwell.
Short interest data also paints a fairly cautious picture for Stagwell Inc. relative to its peers. About 10.64% of Stagwell Inc.'s float is sold short, higher than Omnicom Group Inc. at 8.84% and Cognizant Technology Solutions Corporation at 7.35%, and well above Accenture plc at 3.60%. This suggests Stagwell Inc. is drawing more skepticism than all three peers, as investors weigh its transformation plans and whether future growth can justify its valuation.
Valuation Analysis
STGW's EV/EBITDA is 9.84x. Omnicom Group Inc., Cognizant Technology Solutions Corporation, and Accenture plc trade at EV/EBITDA multiples of 13.29x, 8.05x, and 11.86x, respectively. STGW's own EV/EBITDA was 7.70x on December 31, 2025, making its current multiple approximately 28% higher. We believe the current valuation reflects investor concerns about advertising demand, AI-driven pricing pressure, and Stagwell's complex corporate structure. However, the discount to Omnicom and Accenture appears meaningful given Stagwell's improving profitability and new-business momentum, although its premium to Cognizant shows it is not uniformly cheap. Stagwell's adjusted EBITDA increased 9% to $89.7 million in the first quarter of 2026, while net new business reached a record $141 million, supporting management's full-year adjusted EBITDA guidance of $475 million to $525 million. We believe STGW can justify its current valuation without reaching its more ambitious 2028 targets if these contract wins translate into sustained earnings growth and cash generation. If Stagwell converts its growing client base into cash available to shareholders after acquisition-related payments, the current valuation could offer an attractive entry point despite its advertising exposure and corporate complexity.
Previously, we covered a bullish thesis on Accenture plc (ACN) by Sanjiv in December 2024, which highlighted Accenture's consulting and managed services growth, cloud migration, GenAI opportunities, and consistent returns. ACN's stock price has depreciated by approximately 27.35% since our coverage. We believe STGW could be a good long-term investment if new client wins translate into sustained earnings and cash flow after acquisition payments, supporting its valuation discount to larger peers.
Stagwell Inc. is not on our list of the 40 Most Popular Stocks Among Hedge Funds . While STGW could offer long-term upside if new business wins translate into sustained cash flow after acquisition-related payments, we believe certain AI infrastructure stocks offer far stronger long-term potential at a much more attractive entry point. If you are looking for an AI stock more promising than STGW that operates as a critical AI tollbooth and stands as the most important company in the world, check out our report about this must-own AI stock .
Disclosure: None.
