NEW YORK (TheStreet) -- With AMC Entertainment Holdings' (AMC) Mad 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 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.HHS data by YCharts
3. Harte-Hanks, Inc. (HHS)
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.
- You can view the full analysis from the report here: HHS Ratings Report