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We believe that Omnicom Group Inc. OMC, with a long-term earnings per share growth rate of 4.3% and a market cap of $13.9 billion, is a stock that investors should retain in their portfolio for now.
Factors That Bode Well
Omnicom’s bottom line is in good shape as the company is significantly reducing expenditures amid the pandemic. The company has been investing in the areas of analytics, insights, precision marketing, and digital transformation services for more than a decade. These investments have enabled it to deliver consumer-centric strategic business solutions, ensuring long-term profitability.
Omnicom has a consistent record of returning value to shareholders in the form of dividend and share repurchase. In 2019, Omnicom paid out $571.2 million in dividend and repurchased shares worth $610.2 million. Previously, Omnicom paid out dividends of $544.5 million and $523.4 million to its shareholders, respectively in 2018 and 2017. The company repurchased shares amounting to $581.3 million and $568.4 million, in 2018 and 2017 respectively. Such moves not only instil investors’ confidence but also positively impact earnings per share.
On Dec 8, Omnicom’s board of directors declared a quarterly dividend payment of 65 cents per share. The dividend is payable to its shareholders on Jan 11, 2021 as of record date Dec 21, 2020.
Omnicom Group Inc. Price and Consensus
Omnicom Group Inc. price-consensus-chart | Omnicom Group Inc. Quote
Omnicom’s long-term debt of $5,762 million at the end of third-quarter 2020 was higher than the previous quarter’s level of $5,714. Increasing debt-to-capitalization ratio indicates that the proportion of debt to finance the company’s assets is on the rise.
Further, cash and cash equivalent balance of $3,278 million at the end of the third quarter was well below this debt level, underscoring that the company doesn’t have enough cash to meet its debt burden. However, the cash level can meet the short-term debt of $24 million.
Zacks Rank and Stocks to Consider
Omnicom currently carries a Zacks Rank #3 (Hold).
A few better-ranked stocks in the broader Zacks Business Services sector are CRA International, Inc. CRAI, Gartner, Inc. IT and Insperity, Inc. NSP, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Long-term earnings (three to five years) growth rate for CRA International, Gartner and Insperity is estimated at 13%, 13.5% and 15%, respectively.
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