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, with a market cap of $13.7 billion and long-term (three-five years) expected earnings per share growth rate of 7%, is a stock that investors should retain in their portfolio. Shares of the company have gained 12.5% over the past month.
What’s Supporting the Rally?
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 shareholders as of record 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.
Consistency and diversity of operations, along with increased focus on delivering consumer-centric strategic business solutions ensure Omnicom’s sustained profitability. The company’s adjusted earnings of $1.19 per share increased 1.7% year over year in the first quarter of 2020.
To mitigate the impacts of the coronavirus outbreak on its business, Omnicom has transitioned to a global work-from-home system and implemented business continuity plans.
Omnicom’s total debt to total capital ratio of 0.68 at the end of first-quarter 2020 was higher than the previous quarter’s 0.66. The increasing debt to capitalization ratio indicates that the proportion of debt to finance the company’s assets is on the rise. Higher debt as a percentage of total capital indicates that a company has a higher risk of insolvency in challenging times.
Further, 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 & Key Picks
Omnicom currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader Zacks Business Services sector are DocuSign DOCU, SPS Commerce SPSC and SailPoint Technologies SAIL. All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The long-term expected earnings per share (three to five years) growth rate for DocuSign, SPS Commerce and SailPoint are at 31.2%, 15% and 15%, respectively.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released “Century of Biology: 7 Biotech Stocks to Buy Right Now” to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
See these 7 breakthrough stocks now>>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Omnicom Group Inc. (OMC) : Free Stock Analysis Report
SPS Commerce, Inc. (SPSC) : Free Stock Analysis Report
SailPoint Technologies Holdings, Inc. (SAIL) : Free Stock Analysis Report
DocuSign Inc. (DOCU) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research