It's been a great evening session for Omnicom investors, who saw their shares rise 2.6% to a price of $84.05 per share. At these higher prices, is the company still fairly valued? If you are thinking about investing, make sure to check the company's fundamentals before making a decision.
A Very Low P/E Ratio but Trades Above Its Graham Number:
Omnicom Group Inc., together with its subsidiaries, offers advertising, marketing, and corporate communications services. The company belongs to the Consumer Discretionary sector, which has an average price to earnings (P/E) ratio of 22.96 and an average price to book (P/B) ratio of 4.24. In contrast, Omnicom has a trailing 12 month P/E ratio of 12.2 and a P/B ratio of 5.15.
Omnicom's PEG ratio is 1.24, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
EPS Trend Sustained Primarily by Reducing the Number of Shares Outstanding:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $15,290 | $14,954 | $13,171 | $14,289 | $14,289 | $14,500 |
| Revenue Growth | n/a | -2.2% | -11.92% | 8.49% | -0.0% | 1.47% |
| Operating Margins | 14% | 14% | 12% | 15% | 15% | 14% |
| Net Margins | 9% | 10% | 8% | 11% | 10% | 10% |
| Net Income (MM) | $1,440 | $1,436 | $1,021 | $1,508 | $1,404 | $1,471 |
| Net Interest Expense (MM) | $266 | $244 | $222 | $236 | $209 | $220 |
| Depreciation & Amort. (MM) | $264 | $232 | $223 | $212 | $219 | $212 |
| Earnings Per Share | $5.83 | $6.06 | $4.37 | $6.53 | $6.36 | $6.870000000000001 |
| EPS Growth | n/a | 3.95% | -27.89% | 49.43% | -2.6% | 8.02% |
| Diluted Shares (MM) | 228 | 221 | 216 | 216 | 207 | 190 |
| Free Cash Flow (MM) | $1,527 | $1,754 | $1,649 | $1,280 | $848 | $721 |
| Capital Expenditures (MM) | $196 | $102 | $75 | $666 | $78 | $77 |
| Current Ratio | 0.9 | 0.91 | 1.0 | 0.98 | 0.97 | 0.97 |
| Total Debt (MM) | $1,667 | $612 | $4 | $10 | $17 | $14 |
| Net Debt / EBITDA | -0.83 | -1.57 | -3.07 | -2.2 | -1.85 | -1.19 |
Omnicom has weak revenue growth and decreasing reinvestment in the business, EPS growth achieved by reducing the number of outstanding shares, and irregular cash flows. On the other hand, the company benefits from low leverage and decent operating margins with a stable trend.
