NEW YORK (TheStreet) -- With AMC Entertainment Holdings' (AMC) - Get ReportMad Men coming to an end, we decided to check TheStreet Ratings for advertising companies that could be good investments. The U.S. remains the leader in the global advertising market. It is projected that marketers in the U.S. will spend close to $200 billion on advertisements next year. That's nearly 32% of the worldwide ad market.

The advertising market is a growing industry. The U.S. had a 4.5% growth in advertising expenditure in 2014, and projected to have a 4.6% increase in 2015, and 4.7% in 2016.

The last presidential election was the biggest ever for advertising spend, with $6 billion. In 2012, candidates and interest groups spent $700 million more than they did on the 2008 presidential election, which at the time was the most expensive election ever. It's a safe bet that the upcoming 2016 presidential election will pass the $6 billion mark.

So what are the best advertising companies investors should be buying? Here are the top three, according to TheStreet Ratings, TheStreet's proprietary ratings tool.

TheStreet Ratings projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.

Buying an S&P 500 stock that TheStreet Ratings rated a buy yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a buy yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.

Check out which advertising companies made the list. And when you're done, be sure to read about which biotech companies to buy now. Year-to-date returns are based on May 22, 2015, closing prices. The highest-rated stock appears last.

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HHS

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3. Harte-Hanks, Inc.

(HHS) - Get Report


Rating: B-

Market Cap: $384 million

Year-to-date return: -20%

Harte-Hanks, Inc. provides various marketing services in the United States and internationally. The company operates in two segments, Customer Interaction and Trillium Software.

"We rate HARTE HANKS INC (HHS) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strongest point has been its expanding profit margins. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • HARTE HANKS INC reported flat earnings per share in the most recent quarter. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. We anticipate these figures will begin to experience more growth in the coming year. During the past fiscal year, HARTE HANKS INC reported lower earnings of $0.38 versus $0.39 in the prior year. This year, the market expects an improvement in earnings ($0.42 versus $0.38).
  • HHS, with its decline in revenue, underperformed when compared the industry average of 4.2%. Since the same quarter one year prior, revenues slightly dropped by 8.7%. Weakness in the company's revenue seems to not be hurting the bottom line, shown by stable earnings per share.
  • The change in net income from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Media industry average. The net income has decreased by 12.5% when compared to the same quarter one year ago, dropping from $1.85 million to $1.62 million.
  • HHS has underperformed the S&P 500 Index, declining 17.14% from its price level of one year ago. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it is one of the factors that makes this stock an attractive investment.
  • The gross profit margin for HARTE HANKS INC is rather low; currently it is at 16.96%. Regardless of HHS's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, HHS's net profit margin of 1.33% is significantly lower than the industry average.
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OMC

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2. Omnicom Group Inc.

(OMC) - Get Report


Rating: B+

Market Cap: $18.8 billion

Year-to-date return: -0.6%

Omnicom Group Inc., together with its subsidiaries, operates as an advertising, marketing, and corporate communications services company in the Americas, Europe, the Middle East, Africa, and the Asia pacific.

"We rate OMNICOM GROUP (OMC) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its solid stock price performance, growth in earnings per share, increase in net income, notable return on equity and good cash flow from operations. We feel its strengths outweigh the fact that the company shows low profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • OMNICOM GROUP has improved earnings per share by 7.8% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, OMNICOM GROUP increased its bottom line by earning $4.25 versus $3.72 in the prior year. This year, the market expects an improvement in earnings ($4.33 versus $4.25).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Media industry average. The net income increased by 1.8% when compared to the same quarter one year prior, going from $205.50 million to $209.10 million.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Media industry and the overall market, OMNICOM GROUP's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has increased to -$238.00 million or 44.68% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 15.01%.
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IPG

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1. The Interpublic Group of Companies, Inc. 

(IPG) - Get Report
Rating: A

Market Cap: $8.6 billion

Year-to-date return: 0.7%

The Interpublic Group of Companies, Inc. provides advertising and marketing services. The company operates in two segments, Integrated Agency Networks and Constituency Management Group.

"We rate INTERPUBLIC GROUP OF COS (IPG) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, compelling growth in net income, revenue growth, notable return on equity and attractive valuation levels. We feel its strengths outweigh the fact that the company shows weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
  • INTERPUBLIC GROUP OF COS reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, INTERPUBLIC GROUP OF COS increased its bottom line by earning $1.12 versus $0.59 in the prior year. This year, the market expects an improvement in earnings ($1.15 versus $1.12).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Media industry. The net income increased by 91.4% when compared to the same quarter one year prior, rising from -$20.90 million to -$1.80 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 4.2%. Since the same quarter one year prior, revenues slightly increased by 2.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Media industry and the overall market, INTERPUBLIC GROUP OF COS's return on equity significantly exceeds that of both the industry average and the S&P 500.

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