Omnicom Group Inc. (OMC)

[investora2z]

RBC Capital have recently raised their price target for Omnicom from $65 to $69. The immediate trigger for the stock is the upcoming earnings on July 18. The last earnings were not very robust as the revenues increased by 2.8% and the net income remained nearly flat. The stock has already appreciated significantly over the last few quarters and is trading around all time highs. The recent rise has factored a lot of future positives. The earnings need to be reasonably good so that the momentum can continue. Any slippage may lead to a correction. There has been some sluggishness in the last few quarters, and the margins have fallen on a ttm basis. However, the company has been a consistent performer over the years with growth in revenue and net income. It has paid dividends consistently, and the 5 year average dividend yield is around 2%. The payout ratio is also reasonable at 36%. Growth in revenues is not easy in the competitive environment, especially in view of the new segments and increased competition. There is a need for faster adaptability, to leverage the growth in popular media. Social media is becoming and extremely popular medium for advertising and sub-segments like social media sponsorships are also gaining in importance. IZEA (IZEA) provides a social media sponsorship platform where advertisers can pay celebrities and other influencers to tweet, pin, blog, youtube, instagram etc., about their products. Advertisers are looking for new methods to attract customers online. At present Omnicom is trading at 18 times ttm earnings and 15 times forward earnings. The price to sales is also low at 1.20. Debt seems to be a bit high, and the current ratio is also low. However, the main metric to watch in the earnings will be the margins / bottomline. Any positive surprise on that can lead to strengthening of the uptrend.