It’s been a roller coaster few weeks for the country and the markets — and Omnicom Group Inc. (NYSE:OMC) is no exception. Shares of OMC stock mildly participated in the Donald Trump rally before dropping like a stone and then recovering again. Shares are now sitting at a new 52-week high with nearly 20% gains in the books since a year ago.
This recent breakout is just the latest reminder that Omnicom stock is a solid long-term pick; its ability to weather an uncertain market is thanks to its strong fundamentals.
Last month, OMC stock reported impressive third-quarter earnings, beating Wall Street’s estimates by three pennies and posting nearly double-digit year-over-year growth. There was some organic sales growth driving that expansion too, which is especially appealing after a flat second quarter.
As I mentioned following the earnings report last month, OMC didn’t immediately begin chugging higher after posting these numbers, as the sales figure actually missed expectations. But the company was going up against difficult comps and its forward-looking numbers continue to look good.
The Outlook for OMC Stock
For the current quarter and current year, earnings are expected to grow 7% on sales growth of about the same, which is substantial in this climate.
In its last earnings report, Omnicom nodded to the fact that the current quarter is ripe with uncertainty thanks in part to the election. But at the same time, savvy moves like a recent big deal with AT&T Inc. (NYSE:T) and a custom-designed growth-hacking marketing agency called KERN X should start paying off.
And that doesn’t even begin to factor in perhaps the most appealing aspect of OMC stock altogether: its sweet dividend. Despite the recent outperformance, Omnicom stock yields 2.5%. The dividend doesn’t have a particularly long track record, having just been instated last year, but it has already been raised once.
The only complication with Omnicom now from an investment perspective is the stock’s valuation. As of the last earnings report, I noted that very few companies of OMC’s caliber are selling for as low as less than 16 times 2017 EPS estimates, so there remained good value. As a result, I recommended buying OMC under $83.
With shares now sitting closer to $88, the question is whether or not it’s still worth getting in.
Doing the math, Omnicom stock is now trading for just over 17 times forward earnings. While I would normally say to wait until a pullback to get in, I believe so strongly in the stock’s momentum that I think it’s still worth a buy at these levels. The breakout on the chart looks great, the dividend looks great and the fundamentals look great, all despite dramatic uncertainty around the election.
Hilary Kramer is the editor of GameChangers, Breakout Stocks Under $10, High 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.
