We believe that Omnicom Group Inc. (OMC - Free Report) , with a long-term earnings per share growth rate of 4.1% and a market cap of $11.4 billion, is a stock that investors should retain in their portfolio for now.
Factors That Auger Well
We believe that consistency and diversity of Omnicom's operations and focus on delivering consumer-centric strategic business solutions ensure long-term profitability. The company is divesting underperforming and non-core businesses, while reorganizing to meet clients’ ever-changing needs.
Many companies across diverse sectors have suspended dividend payouts amid the coronavirus crisis. Nevertheless, Omnicom is one of those few that are sailing through the tough economic time and maintaining dividend payouts. The company announced quarterly dividends of 65 cents per share in May and July.
Omnicom has a track record of consistent dividend payment. It had paid out $571.2 million, $544.5 million and $523.4 million in dividends during 2019, 2018 and 2017, respectively.
Omnicom has a debt laden balance sheet. The company’s debt-to-capital ratio of 0.71 at the end of second-quarter 2020 was higher than the previous quarter’s 0.68. 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 $3.3 billion at the end of the second quarter was well below the long-term debt level of $6.9 billion, underscoring that the company doesn’t have enough cash to meet this debt burden.
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 CoreLogic, Inc. (CLGX - Free Report) , Equifax Inc. (EFX - Free Report) and Elastic N.V. (ESTC - Free Report) . CoreLogic sports a Zacks Rank #1 (Strong Buy), while Equifax and Elastic N.V. 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 CoreLogic, Equifax and Elastic N.V. is 12%, 6.6% and 26%, respectively.
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