In This Article:
- By GF Value
The stock of Omnicom Group (NYSE:OMC, 30-year Financials) gives every indication of being modestly overvalued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $83.64 per share and the market cap of $18 billion, Omnicom Group stock shows every sign of being modestly overvalued. GF Value for Omnicom Group is shown in the chart below.
Because Omnicom Group is relatively overvalued, the long-term return of its stock is likely to be lower than its business growth.
Link: These companies may deliever higher future returns at reduced risk.
It is always important to check the financial strength of a company before buying its stock. Investing in companies with poor financial strength have a higher risk of permanent loss. Looking at the cash-to-debt ratio and interest coverage is a great way to understand the financial strength of a company. Omnicom Group has a cash-to-debt ratio of 0.72, which is in the middle range of the companies in the industry of Media - Diversified. The overall financial strength of Omnicom Group is 5 out of 10, which indicates that the financial strength of Omnicom Group is fair. This is the debt and cash of Omnicom Group over the past years:
It poses less risk to invest in profitable companies, especially those that have demonstrated consistent profitability over the long term. A company with high profit margins is also typically a safer investment than one with low profit margins. Omnicom Group has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $13.2 billion and earnings of $4.51 a share. Its operating margin is 12.46%, which ranks better than 78% of the companies in the industry of Media - Diversified. Overall, GuruFocus ranks the profitability of Omnicom Group at 7 out of 10, which indicates fair profitability. This is the revenue and net income of Omnicom Group over the past years: