OMC - Embedded Expectations Analysis - 2019 08 27
Omnicom Group Inc. (OMC:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) Earnings, with a 12.7x Uniform P/E, implying bearish expectations for the firm. Meanwhile, management has concerns about sustaining growth, debt, and their CRM business.Specifically, management may be concerned about the sustainability of recent organic growth rates and about recent increases to net debt. Moreover, they appear concerned about ongoing affiliate earnings stagnation, and may be concerned about the sustainability of recent improvements in their net debt-to-EBITDA ratio. Furthermore, they may be exaggerating the value of their organizational changes, and may lack confidence in their ability to adapt to the changing media landscape. In addition, they may be concerned about their ability to find valuable investment opportunities, and about declining revenues in their CRM Execution & Support discipline. Finally, they appear concerned about the value of their investments in Annalect and Omni, and the ongoing FX headwinds impacting their revenue and cash balances.
Omnicom Group is a holding company, engaged in providing advertising, marketing and corporate communications services. The company's networks and agencies provide a range of services in the following fundamental disciplines: advertising, customer relationship management, public relations and healthcare. The company's Service offerings include, among others, advertising, branding, content marketing, corporate social responsibility consulting, crisis communications, custom publishing, data analytics, database management, digital/direct marketing, digital transformation, entertainment marketing, experiential marketing, field marketing, financial/corporate business-to-business advertising, and imaging.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
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