Omnicom Group, Inc. – Value Analysis (NYSE:OMC) : October 6, 2017

Capitalcube gives Omnicom Group, Inc. a score of 53.

Our analysis is based on comparing Omnicom Group, Inc. with the following peers – Interpublic Group of Companies, Inc., MDC Partners Inc. Class A, Lamar Advertising Company Class A, Clear Channel Outdoor Holdings, Inc. Class A, Publicis Groupe SA Sponsored ADR, Alliance Data Systems Corporation, Harte-Hanks, Inc., Seek Limited Unsponsored ADR and eBay Inc. (IPG-US, MDCA-US, LAMR-US, CCO-US, PUBGY-US, ADS-US, HHS-US, SKLTY-US and EBAY-US).

Investment Outlook

Omnicom Group, Inc. has a fundamental score of 53 and has a relative valuation of UNDERVALUED.

Fundamental Score

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Company Overview

  • From a peer analysis angle, relative underperformance over the last year has improved more recently.
  • It currently trades at a Price/Book ratio of (5.98).
  • OMC-US‘s operating performance is relatively good compared to its peers. The market currently does not expect high earnings growth relative to its peers but seems to expect the company to maintain its relatively high rates of return.
  • OMC-US‘s median net profit margins and relatively high asset efficiency give it some operating leverage.
  • Compared with its chosen peers, the company’s annual revenues and earnings change at a slower rate, implying a lack of strategic focus and/or lack of execution success.
  • OMC-US‘s return on assets currently and over the past five years suggest that its relatively high operating returns are sustainable.
  • The company’s relatively low gross margin and median pre-tax margin suggest operations may be constrained on pricing versus peers.
  • While OMC-US‘s revenues growth has been below the peer median in the last few years, the market still gives the stock a P/E ratio that is around peer median and seems to see the company as a long-term strategic bet.
  • The company’s level of capital investment is relatively low and suggests it is milking the business.
  • OMC-US has additional debt capacity.

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Leverage & Liquidity

OMC-US has additional debt capacity.

  • With debt at a reasonable 21.62% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 23.32%), and a well-cushioned interest coverage level of 9.98x, OMC-US has the capacity to borrow some more.
  • All 9 peers for the company have an outstanding debt balance.

OMC-US has maintained its relatively high liquidity profile from the recent year-end.

  • OMC-US‘s interest coverage is similar to its five-year average interest coverage of 10.14x.
  • Compared to 2016, interest coverage has remained relatively stable for both the company (9.98x) and the peer median (6.72x).
  • OMC-US‘s debt-EV continues to trend downward and is below (but within one standard deviation of) its five-year average debt-EV of 22.52%.
  • Though its debt-EV has remained relatively stable at 21.62% compared to 2016, its peer median has decreased to 23.32% from 24.09% during this period.

Access the detailed analysis for Omnicom Group, Inc.

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Interpublic Group of Companies, Inc. 16.41 0.93 10.49 51.6
MDC Partners Inc. Class A 56.77 0.68 1.85 13.59
Lamar Advertising Company Class A 25.02 1.48 3.45 22.15
Clear Channel Outdoor Holdings, Inc. Class A 74.56 1.52 0.7 4.31
Publicis Groupe SA Sponsored ADR 21.03 0.88 13.79 43.65
Alliance Data Systems Corporation 64.87 2.25 2.66 11.69
Harte-Hanks, Inc. 19.27 1.8 -4.95 -649.8
Seek Limited Unsponsored ADR 14.48 1.56 10.12 30
eBay Inc. 28.75 2.37 10.3 28.15
Omnicom Group Inc 21.62 0.89 9.98 33.76
Peer Median 23.32 1.5 6.72 25.15
Best In Class 14.48 2.37 13.79 51.6

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Company Profile

Omnicom Group, Inc. is a holding company, which engages in the management and provision of advertising agencies. It offers marketing and corporate communications services. The company was founded in 1986 and is headquartered in New York, NY.


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