Entering text into the input field will update the search result below

Omnicom Group Positioned To Thrive, Not Just Survive

Jun. 01, 2020 11:30 AM ETOmnicom Group Inc. (OMC)3 Comments
David Trainer profile picture
David Trainer


  • We first made OMC a Long Idea in May 2018 and with an even cheaper valuation, it looks even more attractive today.
  • OMC has the cash to survive the current disruption to operations, with $2.7 billion in cash and equivalents on its balance sheet at the end of 1Q20.
  • After falling 32% YTD, OMC now trades at its cheapest PEBV in the history of our model.
  • Looking for more stock ideas like this one? Get them exclusively at Value Investing 2.0 . Get started today »

Fears that the economic slowdown will permanently and drastically reduce advertising spend lead investors to overlook this highly profitable industry leader. We suggest investors look past the current economic downturn and set their sights on the opportunity that awaits this best-in-class business when the economy recovers. Omnicom Group, Inc. (NYSE:OMC) is this week’s Long Idea.

Don’t Throw the Baby Out with the Bathwater

We first made OMC a Long Idea in May 2018 and it has since underperformed the market (down 27% vs S&P 500 up 6%). We noted at the time of our report that OMC’s list of loyal clients, many of whom had been with the firm for decades, and its leading profitability positioned the firm to capitalize on industry growth.

With an even cheaper valuation, OMC looks even more attractive today. Before COVID-19, advertising and marketing firms were increasing their growth forecasts for 2020. While those forecasts have certainly changed in the short term, businesses will still need to manage their brands and attract customers, both during and after the crisis. Longer term, we believe there will be pent up demand for advertising, public relations, and brand building, even if some business operations are different in a post COVID-19 world.

OMC’s History of Profit Growth

OMC has a strong history of profit growth. Over the past decade, OMC has grown revenue by 2% compounded annually and core earnings[1] by 5% compounded annually, per Figure 1. Longer term, OMC has grown core earnings by 7% compounded annually over the past two decades. The firm increased its core earnings margin from 7% in 2009 to 9% in the TTM period.

Figure 1: OMC’s Core Earnings & Revenue Growth Since 2009

Sources: New Constructs, LLC and company filings.

OMC’s rising profitability helps the business generate significant free cash flow (

Sources: New Constructs, LLC and company filings.

Sources: New Constructs, LLC and PWC Global Entertainment & Media Outlook 2019-2023.

Sources: New Constructs, LLC and company filings.

Sources: New Constructs, LLC and company filings.

Sources: New Constructs, LLC and company filings.

Get our long and short/warning ideas. Access to top accounting and finance experts.


1. Daily - long & short idea updates, forensic accounting insights, chat

2. Weekly - exclusive access to in-depth long & short ideas

3. Monthly - 40 large, 40 small cap ideas from the Most Attractive & Most Dangerous Stocks Model Portfolios

See the difference that real diligence makes.

This article was written by

David Trainer profile picture
We aim to help investor make more intelligent capital allocation decisions. Our research is driven by proven-superior fundamental data, models and equity/credit ratings.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.