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Hurtling True North


BusinessWeek Investor -- Inside Wall Street

Hurtling True North

Shares of True North Communications (TNO) have been racing upward, thanks to the boom in advertising brought about by the surging economy. The stock of the world's sixth-largest ad company leaped from 28 in early July to more than 42 on Jan. 5--hardly feeling the impact of the Dow's 360-point collapse that very day. Some pros think True North is still way underpriced and has yet to be recognized for its recent turnaround--under the leadership of new CEO David Bell--following a lackluster 1998. True North shares "present the best value in the advertising and marketing-services industry," says Bear Stearns analyst Alexia Quadrani, who notes that True North's stock is trading at 20 times her estimated 2000 earnings of $2.10 a share, compared with an industry average price-earnings ratio of 30. With the coming Presidential elections and the Sydney Olympics--on top of the surge in Web advertising--the True North story becomes even more compelling, she adds. Quadrani's target price for the stock is 60.

The Internet has driven up ad spending as new Web-based companies try to establish identities. Meanwhile, established advertisers are also spending more--to bolster their brands against new rivals. True North owns 50% of major interactive ad and e-commerce company Modem Media.Poppe Tyson.

Although acquisitions have played a big role in True North's growth--it doubled in size after acquiring ace ad agency Bozell, Jacobs, Kenyon & Eckhardt in late 1997--Chairman Bell (who was Bozell's CEO) says he will refocus on organic growth as part of his goal to achieve growth in earnings per share of 15% a year.

Morgan Stanley Dean Witter analyst Michael Russell rates the stock a "strong buy."Return to top

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