Stagwell Inc (STGW): what the price assumes

In the published model solve dated 2026-Q2, anchored at $8.84, Stagwell Inc (STGW) is priced for +15.3% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-11.

Generated: 2026-08-10 · Exported: 2026-08-12 · Source: https://boothcheck.com/report/STGW

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The operating-margin figure is value-band context at year 12: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 7.9% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~8.2pp.

Reconcile: at the x-ray's 9.3% required return this reads ~5.3 years; the models below use their own rates.

How unusual the bet is: within-range

Valuation X-Ray

Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Growth Families that call it expensive: Asset, Earnings, Relative

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 6.9%); the inversion above states its own rate.

Per-Model Detail (n=11)

Economic-Unit Decomposition (Sum Of The Parts)

One or more material disclosed units has unresolved economics. Unknown/general is not evidence of homogeneity: segment SOTP is primary but incomplete, consolidated cash flow may remain only a secondary cross-check when every unit shares an enterprise basis, and one sector multiple or target margin is withheld.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

Bullet Takeaways

• Stagwell is a digital-first marketing holding company built by acquisition, generating $2.96 billion in trailing revenue and $141 million of record net new business in Q1 2026, including a $60 million multi-year government contract.
• The biggest risk is the balance sheet meeting the ad cycle: debt-to-equity of 1.99, a current ratio of 0.83, and a 10-K that names "recessionary economic" conditions as a direct threat to client budgets.
• Watch full-year execution against reiterated 2026 guidance of 8% to 12% net revenue growth and $475 million to $525 million of adjusted EBITDA, and whether free cash flow converts at the promised 50% to 60%.

Bull Case

The balance sheet tells you where management is placing its bets, and Stagwell is spending aggressively on its own stock. Trailing buybacks ran $163.9 million against reported net income of just $24 million, a ratio that only makes sense if you read the business through cash generation rather than GAAP earnings: trailing free cash flow was $280 million, a 14% free-cash yield on the market cap. The 10-K frames capital allocation as the point of the enterprise, a company "focused on delivering strong organic growth and free cash flow to support efficient capital allocation" with a stated track record in "acquisition execution and integration". When a company retires its share count this fast at a depressed multiple, it is telling you it thinks the equity is cheap.

The operating momentum backs the spending. Q1 2026 revenue of $704 million grew 8% year over year, and the more telling number is the pipeline: record net new business of $141 million in the quarter and $486 million on a trailing-twelve-month basis, running roughly $80 million ahead of the same point a year earlier. Stagwell signed a $60 million multi-year government contract and booked $12 million toward a $25 million first-year target for its AI and enterprise-tech products. This is a holding company winning share in exactly the parts of marketing that are growing, the digital and data-driven work the 10-K describes as where "growth in the marketing services industry now comes primarily".

The positioning is structural, not accidental. Stagwell was assembled specifically to sit on the digital, performance, and technology side of the marketing business rather than the legacy creative-agency model, and management reiterated full-year 2026 guidance for 8% to 12% net revenue growth with $475 million to $525 million of adjusted EBITDA. The share count is falling, the pipeline is at a record, and the free cash flow funds the buyback without new leverage. For a stock at $7.80 trading below one times sales, the bull case is that the market is pricing the messy GAAP income statement and ignoring the cash the business actually throws off.

Bear Case

Advertising is the first line item clients cut when the economy turns, and Stagwell's own 10-K is unusually blunt about it. The risk factors name the machinery of the threat directly: client loss driven by "consolidation, insolvency or a reduction in marketing budgets due to recessionary economic" conditions, compounded by "inflationary pressures, currency fluctuations, geopolitical uncertainty and elevated interest rates" that reduce demand for its services. This is a business whose revenue is a derivative of other companies' confidence, and it carries that macro sensitivity into a balance sheet with little slack. A downturn does not dent Stagwell at the margin; it hits the top line directly, and the top line is what services the debt.

That debt is the second problem. Debt-to-equity sits at 1.99, the current ratio is 0.83 (current liabilities exceed current assets), and the Altman score of 0.98 lands in distress territory. The 10-K discloses a covenant obligation to "maintain a Total Leverage Ratio ... below an established threshold" under its JPMorgan-led credit agreement, and warns that leverage limits flexibility "in planning for, or reacting to, changes in our business or market conditions". In a cyclical business, a leverage covenant tied to EBITDA is a trapdoor: if a recession compresses EBITDA, the leverage ratio rises mechanically toward the covenant just as the operating environment is worst.

The reported earnings quality is the tell that the story is being carried by adjustments. GAAP operating margin swung from 8.2% in the September quarter to 1.37% in the March quarter, net income turned negative in the most recent quarter, and the trailing P/E of 103 reflects a business barely profitable on a GAAP basis while the bull case leans entirely on adjusted EBITDA and free cash flow. Operating cash flow itself is lumpy, negative $26.5 million in the March quarter after positive $260 million in December, the working-capital swings typical of a project-based services model. The price is paying about 31x company-wide operating income for growth the company has to sustain for years; only about 41% of comparable fast-growers held that pace for even five, and few of them carried this much leverage into the attempt.

Valuation

The methods disagree sharply, and the disagreement is the whole story. At $7.80 (July 11, 2026), the relative-multiple and growth-oriented lenses find the stock cheap, the price sitting well below where a sales multiple or a cash-flow model would place it, while the asset-based and earnings-power lenses find it wildly expensive, more than double to many times what tangible book and normalized GAAP earnings support. That pattern is characteristic of an acquisitive holding company: the balance sheet is loaded with goodwill and intangibles from past deals, so asset-based methods read the equity as thin (book value is just $2.81 per share), while the cash the operating businesses generate reads the price as a bargain.

Inverting the price makes the bet concrete. At today's level the market is paying about 31x company-wide operating income, embedding roughly 17.5% annual operating growth for five years. The margin requirement is undemanding, the business only has to hold roughly the operating margin it already earns, so the stretch is in duration, not in a margin miracle. Two trailing operating-income bases are in play (a record basis near $257 million and an EDGAR trailing basis near $150 million, about 71% apart), which is itself a reminder that a single quarter's margin, ranging from 1.37% to 8.2% over the last four prints, tells you little. The honest read is that the price is a bet on the growth pipeline persisting, and management's reiterated guidance of 8% to 12% net revenue growth is the closest thing to a stated version of that bet.

Solvency is where the valuation debate gets settled. The framework reads leverage as moderate and well covered on trailing cash flow, but the raw ratios are less forgiving: debt-to-equity near 2.0, a current ratio below 1.0, and a covenant-bearing credit agreement the 10-K details. The bull number is the 14% free-cash yield; the bear number is the leverage that yield has to keep servicing through a cycle. The price is cheap against the cash flow and expensive against the balance sheet, and which one governs depends entirely on whether the ad cycle cooperates over the life of the growth the price assumes.

Catalysts

Q1 2026 set the tone for the year. Stagwell reported revenue of $704 million, up 8% year over year, with net revenue of $585 million up 4%, adjusted EBITDA of $90 million up 9% at a 15% margin, and adjusted earnings per share of $0.17 up 31%. The standout was demand: record net new business of $141 million in the quarter and $486 million on a trailing-twelve-month basis, running about $80 million ahead of the prior year, with several additional major assignments described as in final negotiation.

The wins that matter for the forward story are the ones that diversify the client base away from discretionary consumer advertising. Management flagged a $60 million multi-year government contract and early traction in enterprise technology, including $12 million booked toward a $25 million first-year target for its AI and enterprise product line. The company reiterated full-year 2026 guidance for 8% to 12% total net revenue growth, adjusted EBITDA of $475 million to $525 million, and free cash flow conversion of 50% to 60%. The checkpoints from here are whether the pipeline converts to billed revenue, whether free cash flow lands in the guided conversion band given the lumpy quarterly cash flows, and whether the pace of buybacks continues against that cash. The next quarterly report is the next read on all three.

Peer Cohorts (Per Segment, With Filing Citations)

Marketing Services / Digital Transformation +2 more (reported)

• OMC (OMNICOM GROUP INC.)
• FY2025 10-K: …for our services. Revenue is typically lower in the first and third quarters and higher in the second and fourth quarters, reflecting client spending patterns during the year, as well as additional project work that usually occurs in the fourth quarter. Certain global events targeted by major marketers for…
• FY2025 10-K: …crisis communications multi-cultural marketing customer data analytics and data-driven decision making organizational communications customer relationship management package design decision sciences performance marketing digital experience design product placement digital transformation promotional marketing…
• WPP (WPP plc)
• FY2025 20-F: …in the period in which they are incurred. REVENUE RECOGNITION The Group offers national and multinational clients a comprehensive range of communications, experience, commerce and technology services. Certain contracts involve multiple agencies offering different services in different countries. As such, the terms of…
• FY2025 20-F: …derived from integrated product offerings including media placements and creative services. Revenue may consist of various arrangements involving commissions, fees, incentive-based revenue or a combination of the three, as agreed upon with each client. Revenue for commissions on purchased media is typically…
• ZETA (ZETA GLOBAL HOLDINGS CORP.)
• FY2025 10-K: …for our customers in these markets. Our use of email and other messaging services to send communications to consumers may also result in legal claims against us, for which we may incur increased expenses, and if successful might result in fines and orders with costly reporting and compliance obligations or might…
• FY2025 10-K: …and administrative expenses to increase in absolute dollars in future periods. We expect that general and administrative expenses to decrease as a percentage of revenue over the long term. Selling and marketing expenses Selling and marketing expenses primarily consist of employee-related costs, including salaries,…
• SEMR (Semrush Holdings, Inc.)
• FY2025 10-K: …components of a company's online strategy. These workflows include analyzing trends, identifying potential opportunities, creating high-quality content efficiently, helping customers assess different marketing approaches, executing campaigns regularly, and measuring the effectiveness of their digital marketing…
• FY2025 10-K: …features and functionality, and by providing customer support to explain such additional features and functionality. Our failure to attract new free customers and convert them into paying customers could have a material adverse effect on our operating results as our business may be adversely affected by the costs of,…

The Marketing Cloud (reported)

• ZETA (ZETA GLOBAL HOLDINGS CORP.)
• FY2025 10-K: …Leading Indicators, and Journey Insights. Competitors providers marketers with actionable insights on the business's competitive set, as synthesized by Zeta data and generative AI, and various applications to capture market share and prevent customer attrition. Example applications include CompetitorPulse, and…
• FY2025 10-K: …2024, we were also recognized as a "Strong Performer" in The Forrester Wave : Customer Data Platforms for B2C, with the highest possible scores across six criteria, and as a "Challenger" in Gartner's Magic Quadrant : Multi-Channel Marketing Hubs, Q4, 2024. In addition, in 2023, we were named as a "Leader" in IDC's…
• SEMR (Semrush Holdings, Inc.)
• FY2025 10-K: …components of a company's online strategy. These workflows include analyzing trends, identifying potential opportunities, creating high-quality content efficiently, helping customers assess different marketing approaches, executing campaigns regularly, and measuring the effectiveness of their digital marketing…
• FY2025 10-K: …or to access specialized features and functionalities - such as AI brand insights, content marketing tools, or historical data tracking. Within each subscription tier, customers can also purchase incremental usage limits (e.g., additional projects, more keywords to track, extra user licenses) without necessarily…
• BRZE (Braze, Inc.)
• FY2025 10-K: …enterprises and leading technology innovators, and span a wide variety of sizes and industries, including retail and consumer goods, media and entertainment, telecommunications, restaurants and on-demand services, healthcare and life sciences, technology, manufacturing, education, government and public services, and…
• FY2025 10-K: …Teams, customers can create groups to manage individual regions or subsets of their businesses while restricting the ability of specified users to view or manage data outside of their assigned region. We also integrate with a variety of identity providers for single-sign-on or user account provisioning and provide…
• KVYO (Klaviyo, Inc.)
• FY2025 10-K: …programs, such as Customer Success at Scale, Voice of the Customer, and dedicated Customer Success Managers for our largest customers. With this ongoing feedback, we can continue to make impactful improvements to our platform and to the customer experiences we offer. Competition The market in which we compete is…
• FY2025 10-K: JavaScript, and CSS that use techniques like backend-for-frontend APIs and leverage content delivery networks to reduce latency in accessing data. 14 Table of Contents Our Partner Ecosystem Our partner ecosystem enriches our customer offerings and helps us reach a broader audience than we would be able to reach on our…
• DV (DoubleVerify Holdings, Inc.)
• FY2025 10-K: …categories. Our marketing team's objectives are to build brand leadership globally, drive sales empowerment through lead generation and top-of-funnel pipeline growth, and support customer retention and up-sell through industry insights, thought leadership and analysis of customer data. We execute this strategy…
• FY2025 10-K: …their businesses and new companies and technologies enter the market, which could lead to commoditization and harm our ability to increase revenue and maintain profitability. Our success depends on our ability to retain and grow our existing customers and market and sell our platform and solutions to new customers.…
• TTD (TRADE DESK, INC.)
• FY2025 10-K: …and machine learning capabilities. Seasonality In the advertising industry, companies commonly experience seasonal fluctuations in revenue. For example, many advertisers allocate the largest portion of their budgets to the fourth quarter of the calendar year in order to coincide with increased holiday purchasing.…
• FY2025 10-K: …believe that by aligning our core offerings with buyers, we are able to avoid the conflicts of interest of our competitors who serve both the buy side and sell side. We provide and are developing offerings and features that work with publishers and supply-side partners to help ensure access to quality advertising…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.