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Why Should You Retain Omnicom (OMC) Stock in Your Portfolio?

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A prudent investment decision involves buying stocks that have solid prospects and selling those that carry risks. At times, it is rational to hold certain stocks that have enough potential but are weighed down by tough market conditions.

We believe Omnicom Group Inc. (OMC - Free Report) , with a market cap of $11.5 billion and long-term (three-five years) expected earnings per share growth rate of 7%, is a stock that investors should retain in their portfolios. The company’s shares have gained 4.9% in the past three months.

What Bodes Well for the Company?

Consistency and diversity of operations, along with increased focus on delivering consumer-centric strategic business solutions ensure Omnicom’s long-term profitability. To mitigate the impacts of the coronavirus outbreak on its business, the company has transitioned to a global work-from-home system and implemented business-continuity plans.

Although many companies across diverse sectors have suspended dividend payouts amid the coronavirus crisis, Omnicom remains one of those few that are sailing through the tough economic time and maintaining dividend payouts. On May 28, the company announced a quarterly dividend of 65 cents per share payable on Jul 10 to its shareholders on record as of Jun 12.

Omnicom has a track record of consistent dividend payment. It had paid $571.2 million, $544.5 million and $523.4 million in dividends during 2019, 2018 and 2017 respectively.

Hurdles to Counter

Omnicom’sfinancial performance is expected to remain under  temporary pressure because of drop in business activities due to the coronavirus pandemic.

The company’s cash and cash equivalent balance of $2.7 billion at the end of the first quarter was well below the long-term debt level of $6.3 billion, underscoring that it doesn’t have enough cash to meet this debt burden. The cash level, however, can meet the short-term debt of $11 million.

Zacks Rank and Stocks to Consider

Omnicom currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader Zacks Business Services sector are DocuSign (DOCU - Free Report) , SailPoint Technologies and Elastic N.V. (ESTC - Free Report) . All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term expected earnings per share (three to five years) growth rate for DocuSign, SailPoint and Elastic N.V. is 31.2%, 15% and 26%, respectively.

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Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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