Omnicom Group Inc. (OMC) stock analysis

P/E against its history

Not enough price and earnings history to compare.

P/E against the industry

Needs positive earnings and enough profitable companies in the industry.

EV/EBITDA above its 5-year median

Omnicom's EV/EBITDA of 13.9 is above its 5-year median of 8.4.

P/B above the industry

Omnicom's price-to-book of 2.44 is above the Business Services median of 0.82.

Trading above fair value

The share price of $88.88 is above our fair value estimate of $68.07.

Margin of safety under 20%

The price is 30.6% above fair value, so there is no margin of safety.

Revenue growing under 10% a year

Revenue grew 6.5% a year over the last three fiscal years, short of the 10% we look for.

EPS growth over 3 years

Needs positive EPS three years ago and today.

Earnings acceleration

Needs positive net income now, a year ago and five years ago.

Growing faster than the industry

Revenue grew 54.1% over the last twelve months; the Business Services median is 4.7%.

Company guidance

No outlook found in earnings releases from the last twelve months.

Gross margin slipping

Gross margin was 12.6% over the last twelve months, against 18.1% a year earlier.

Return on equity under 15%

Return on equity was 9.7% over the last twelve months and averaged 32.5% over five years; we look for 15% on both.

Return on capital under 10%

Return on invested capital was 9.2%, below the 10% that usually covers the cost of capital.

Return on equity above the industry

Omnicom's return on equity of 9.7% is above the Business Services median of -39.2%.

Earnings over 5 years

Needs positive net income five years ago and in the latest year.

Net margin below its 5-year average

Net margin was 2.8% over the last twelve months, against a 5-year average of 7.5%.

Net margin above the industry

Omnicom's net margin of 2.8% is above the Business Services median of -9.4%.

High debt

Debt is 95.0% of shareholders' equity, above the 40% we consider low.

Debt falling against equity

Debt to equity fell from 188% five years ago to 95.0%.

Debt covered by cash flow

Operating cash flow over the last twelve months equals 32.5% of total debt.

Interest not well covered

Operating income covers interest expense 3.5 times; we look for at least 5.

Short-term assets don't cover short-term debts

Current assets are 0.91 times current liabilities.

Elevated bankruptcy risk

The Altman Z-score is 1.25; above 3 is the safe zone and below 1.8 the distress zone.

Pays a dividend

Omnicom paid dividends worth 3.6% of the share price over the last twelve months.

Yield below Treasuries

The 3.6% yield is below the 4.4% on a 1-year Treasury.

Yield below the top quarter

The top quarter of US dividend payers yield 3.8% or more; Omnicom yields 3.6%.

Dividend not cut

The dividend per share has not fallen by more than 10% in any of the last 10 fiscal years.

Not covered by earnings

Dividends take 119% of net income, leaving little room.

Covered by free cash flow

Dividends take 29.3% of free cash flow.