Omnicom Group Inc. (OMC) Is Built for More Growth

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I’ve been a fan of Omnicom Group Inc. (NYSE:OMC) for some time now, and OMC stock continues to handily outperform the market. Year-to-date and over the last 12 months, it has booked gains that double those of the broader S&P 500. That’s nothing to sneeze at. 

Omnicom Stock: OMC Is Built for More GrowthPlus, the advertising and marketing holding company continues to garner good press. It was named to Forbes’ 2016 list of most innovative companies, recently announced a big deal with AT&T Inc. (NYSE:T) and, most importantly, just launched a custom designed growth-hacking marketing agency called KERN X.

This new agency aims to provide startups with exclusive, personalized marketing and promotion strategies, which bridges Omnicom’s expertise with a blossoming startup market. That’s good news and it should add more fuel to OMC stock’s run.

While Omnicom isn’t a pure growth play, it’s good to see there are growth opportunities in the works in addition to its existing and reliable core business.

Growth Opportunities for Omnicom Stock

The most recent quarter was decent for OMC, but not stellar. The good news is that, despite an overall blended earnings decline for the S&P 500, Omnicom managed to post growth — and some organic growth at that. Earnings grew nearly 8% year-over-year, topping Wall Street’s expectations, while revenues grew 3.8% on an organic basis, coming right in line with analysts’ hopes.

The headwinds holding Omnicom back, though, have been macro to say the least. For example, management expressed that there has been some hesitation from clients regarding their advertising budgets in the wake of the Brexit vote. Also, management noted that recent mass shootings and terror attacks have stifled growth for its customer relationship management segment.

While none of these events (or their impact on the Omnicom business) are good things, it’s at least promising from an investment standpoint that all struggles are external. Once again, the company’s core business or rising competitors aren’t stifling growth. Meanwhile, the actions OMC is taking are instead promising, such as the launch of KERN X and the fact that it continues to be applauded for its innovation.

One thing to note, though, is that Omnicom stock is currently priced slightly higher than what I would like for an ideal initial entry. Still, I believe it’s worth a buy considering there is plenty of upside left. The fact that OMC can deliver strong results, even in the wake of a difficult environment, speaks to its resilience. And yet its resilience doesn’t mean a lack of progress. The company continues to innovate and find new market opportunities that are key qualities for any investment.

As a result, I strongly believe that Omnicom stock will continue to grind higher as it posts more earnings gains. Over the next five years, earnings growth is supposed to equal a sold 6% per year. Combine that with a reasonable 2.6% dividend yield — which, remember, comes despite 22% gains over the last 12 months — and you have a nice one-two punch of resilience and growth.

Hilary Kramer is the editor of GameChangersBreakout Stocks Under $10High Octane Trader,Absolute Capital Return and Value Authority. She is an accomplished investment specialist and market strategist with more than 25 years of experience in portfolio management, equity research, trading, and risk management. She has extensive expertise in global financial management, asset allocation, investment banking and private equity ventures, and is regularly sought after to provide her analysis on Bloomberg, CNBC, Fox Business Network and other media.

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