WPP (LSE: WPP) used to be FTSE100 champion, but it went through a arduous period and the share price fell in 2025. In fact, shareholders have had a disappointing five years.

There’s no denying that investing in a company whose business is under pressure can be risky. But at the same time, a depressed share price could also represent a golden opportunity for economic recovery.

Looking at valuations and forecasts, I think there is a good chance for WPP to rebound over the next few years. Let me explain why.

Interim results

Discussing the first half results in August, CEO Mike Read admitted that “a challenging first half given pressure on customer spending and a slower fresh business environment“. But he also talked about “significant progress in the repositioning of WPP Media, simplifying the organizational model to boost efficiency and reduce costs“.

The company is therefore at the cost reduction stage. This can be a crucial step when the current business model is no longer viable and re-focusing is necessary.

The half saw a 7.8% drop in reported revenues, which didn’t surprise me. However, comparable revenues were only down 2.4%, which I find encouraging.

Dividend payment

The company declared an interim dividend of 7.5 pence. This is only half of the 15p paid at the same stage in 2024. However, I believe there is a good chance of suspending the dividend altogether for cost saving reasons.

Forecasts actually suggest a dividend yield of 6.8% for the full year, which is high by FTSE 100 standards. So there was clearly room for something more drastic. I believe we could still see a larger reduction by the end of the year.

The fact that we saw any dividends at all suggests that management didn’t panic. City analysts predict a change in the situation from 2026.

Financial year

Will 2025 be a turning point in WPP’s recovery plans? Forecasts show earnings per share falling by 10% for full-year 2025. But they see earnings per share rising again, by 3.6% in 2026 and another 12.5% ​​in 2027.

Forecasts are often wrong. And if the business situation doesn’t improve in 2026 the way brokers – and the company – think it will, we could see further share price declines.

However, I believe that the current valuation exaggerates the risks and misjudges WPP’s confident chances for recovery.

The price-to-earnings (P/E) ratio for the current year is forecast to be 7.7, close to half the FTSE 100 average. And by 2027, it will fall to just 6.6 if forecasts are correct and profits return and easily cover future dividends.

My verdict

For me, a regenerative purchase hinges on a few key questions. Do I see a long-term, quality company? For WPP, yes. Does the forecast look good? We have already seen a positive answer to this question.

Is there a sufficient margin of safety in the valuation? For such a company, the low P/E ratio coupled with confident earnings and dividend forecasts make it so – at least according to my personal risk tolerance.

Others will judge things differently. But WPP is certainly a recovery resource worth considering, right? I think of it as a potential purchase for my ISA.