This communications company looks undervalued, but is expected to grow its earnings by more than 20% this year. The shares have a current dividend yield of 3.91%, paid quarterly.
Omnicom Group Inc. (OMC)
From The Prudent Speculator
Omnicom Group provides advertising, marketing, and corporate communications services. The company’s agencies offer a comprehensive range of services including traditional media advertising, customer relationship management (CRM), public relations and specialty communications.
OMC scores very well in our proprietary valuation framework, while management has been active in repurchasing its shares. OMC’s EPS took a hit in 2020 to $4.85, but analysts expect a recovery to 2019’s $6 level this year as corporate advertising picks up. OMC trades for 1.1 times sales, while the free cash flow yield is a generous, 14% and the forward P/E ratio is under 12.
Omnicom’s balance sheet includes $3.3 billion of cash, $0.5 billion of preferred obligations and
$6.9 billion of long-term debt, with $1.625 billion of liquidity available, and the current debt load carries a weighted coupon of 3.0% and maturity of October 2026 (5.8 years), giving management flexibility to operate in a somewhat uncertain advertising environment.
John Buckingham, The Prudent Speculator, theprudentspeculator.com, 877-817-4394, September 3, 2021