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When I think of a FTSE 250 turnaround story, WPP (LSE: WPP) immediately springs to mind.
Once a heavyweight in the FTSE 100 Index, the global advertising group has suffered a sharp fall from grace. But after a punishing year, there are early signs that it could be gearing up for a comeback.
What’s happening to the share price?
There’s no doubt the company’s shares have taken a battering. Over the past 12 months, the stock has slumped by around 53.1% as I write on 9 January as investors lost confidence in the firm’s outlook.
Slowing advertising spend, profit warnings and lost client contracts triggered a wave of selling. But interestingly, in the last month alone, the share price has rebounded 8.2% as value hunters began circling.
Today, the shares change hands for around 343p, giving the stock a price-to-earnings (P/E) ratio of 10. That’s well below the FTSE 250 average and may suggest it’s pricing in a lot of bad news already.
The trailing dividend yield sits at a punchy 9%, but will fall from those lofty heights given the 50% payout cut in August 2025.
2025: a year to forget
The past year was a brutal one for the company and its shareholders. Advertising budgets have tightened amid economic uncertainty, hitting WPP’s core revenue streams.
The firm has also been slow to adapt to changing client demands, losing ground to more agile rivals that have embraced digital and data-driven marketing faster.
In October, the company issued a profit warning and confirmed the departure of CEO Mark Read. That was followed by news that WPP would drop out of the FTSE 100 for the first time in decades.
Could a recovery be on the cards?
Despite the gloomy backdrop, there are reasons for cautious optimism. New CEO Cindy Rose has signalled a clear intent to streamline operations, focus on growth areas and rebuild investor trust. That includes doubling down on AI-powered marketing platforms and strengthening WPP’s position in high-demand areas like data analytics and digital strategy.
Recent reports also suggest the company has secured several new contracts, including a UK government contract worth up to £2bn announced in December. That alone should give investors some confidence in the company’s ability to win and retain customers.
At the same time, the current valuation may appeal to long-term investors willing to take a view on recovery. With such a steep fall already, any signs of operational improvement or stabilising revenues could give the share price room to run.
My verdict
WPP is certainly not out of the woods. Significant challenges remain, from fierce competition to questions over its sustainable dividend level. Any investor considering the shares must be comfortable with the heightened risks of a prolonged turnaround, but that’s the nature of the beast in value investing.
However, this is still a global brand with deep client relationships and a long history of success. If management can execute its strategy and capitalise on the power of AI and data in 2026, then the shares could look cheap in hindsight.
While I won’t be taking a bet on WPP in 2026, it could be one for investors considering FTSE 250 recovery opportunities to look at more closely.
