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Here's Why You Should Retain Omnicom (OMC) Stock For Now

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Omnicom Group Inc. (OMC - Free Report) has an impressive Growth Score of B. This style score condenses all the essential metrics from a company’s financial statements to get a true sense of the quality and sustainability of its growth.

The company has an expected long-term (three to five years) earnings per share growth rate of 8.2%. Its earnings for 2021 and 2022 are expected to grow 21.6% and 4.8% year over year, respectively.

The stock has gained 35.2% over the past year, outperforming the 32.5% growth of the Zacks S&P 500 composite.

What’s Supporting the Rally?

Omnicom continues to focus on its internal development initiatives. To increase operational efficiency, the company has been making investments in real estate, back-office services, procurement and IT. It is also investing in data, analytics and precision marketing. Driven by such positives, we expect Omnicom to witness higher revenues on the back of organic growth.

Omnicom’s bottom line is in good shape as the company has been divesting underperforming and non-core businesses, and reorganizing itself to meet clients’ ever-changing needs. We believe that consistency and diversity of Omnicom's operations and increased focus on delivering consumer-centric strategic business solutions, ensures long-term profitability for Omnicom.

Omnicom has a consistent record of returning value to shareholders in the form of dividend and share repurchases. It paid a respective $562.7 million, $564.3 million and $548.5 million in dividends in 2020, 2019 and 2018. The company repurchased shares worth $222 million, $610.2 and $581.3 million, respectively, in 2020, 2019 and 2018.

Debt Woe Stays

Omnicom’s cash and cash equivalent balance of $4.4 billion at the end of second-quarter 2021 was well below the total debt level $5.3 billion, underscoring that the company doesn’t have enough cash to meet its debt burden. The cash level, however, can meet the short-term debt of $9 million.

Zacks Rank and Stocks to Consider

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

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the broader Zacks Business Services sector are Cross Country Healthcare (CCRN - Free Report) , Equifax (EFX - Free Report)  and TransUnion (TRU - Free Report) , each carrying a Zacks Rank #2 (Buy).

The long-term expected earnings per share (three to five years) growth rate for Cross Country Healthcare, Equifax and TransUnion is 9.9%, 15.2% and 22%, respectively.