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Tickers in this Article: WPPGY, OMC, IPG, MSFT, GOOG, YHOO
It's been nearly a year since I recommended investors stock up on London-based global ad giant WPP Group (Nasdaq: WPPGY). The stock is up 35%, leaving some investors wondering whether it has seen the end of a run. I don't think so. WPP remains a good stock to own.

Talking the Talk
WPP recently held its annual general meeting. Management's remarks suggest good reasons to stay bullish on WPP.

For starters, the world's second biggest advertising and marketing service company is seeing a nice acceleration in its organic revenue growth rate. The second quarter saw a 5.2% rise in "like-for-like" revenue growth, compared with 4.3%% in Q1.

What's more, Chairman Philip Lader doesn't see signs of the macro-environment slowing down its business any time soon. Advertising spending plans remain intact, and WPP sees plenty of growth drivers ahead. "2006 was a good year, our best yet. 2007 promises to be even better," Lader said at the general meeting June 26, 2007. This statement ought to give investors confidence in WPP's prospects, at least over the next few quarters.

A 24/7 Commitment
WPP is now even better positioned to be a channel for how advertising dollars are shifted onto the internet through its $649 million all-cash acquisition of 24/7 Real Media. While some in the market are critical of the purchase of the online advertising group, I think it represents a good use of cash.

With 24/7, WPP gets valuable services that will an edge over rival Interpublic (NYSE: IPG) and No. 1 rated ad-group Omnicom (NYSE: OMC). As advertisers continue their move to digital forums, the ability to capture online ad space and optimize search engine results will be a standard part of any advertising and marketing service package.

The company remains committed to its long term goals of getting one third of its revenue from the fast growing developing markets. Revenues from China and India are growing at 25% and 16% per annum. Right now, emerging markets account for about one-fifth of WPP's business.

WPP remains a solid producer of cash. In its latest quarter, WPP delivered free cash flow of £714 million, generating an impressive free cash yield of 7.2%. What's more, management reiterated its 15% operating margin target for 2007 and its commitment to putting cash to work for shareholders by way of increased buybacks and dividends.

There are Risks
However, as the shares head higher, investors need to be more alert to the stock's risks. A small hiccup could leave investors disappointed.

A potential trouble spot could be big technology providers' aggressive moves into the digital marketing space. WPP is not alone in buying internet plays. Microsoft (Nasdaq: MSFT), Google (Nasdaq: GOOG) and Yahoo! (Nasdaq: YHOO) have each acquired internet advertising properties in recent months, upping the competitive ante for WPP.

Another risk is the highly cyclical nature of the advertising services market. Recall the dog years of 2001-2003, which saw revenues crater at many advertising shops. Even though WPP says 2007 will be a good year, investors still need to keep watch for anything signaling a possible slowdown.


Conclusion
Still, the rewards of industry-leading free cash, a growing push into higher growth emerging markets and WPP's ability to push the needle up in digital marketing should compensate investors for the risks for the time being.

Putting it all together, I think WPP can surprise the market by pulling in around $4.60 in earnings per share in 2007. If you put a 19-times earnings multiple on that, you get a price target of more than $87, up 15% from the current price.

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