Is There an Opportunity in Omnicom After Recent $600M Healthcare Agency Acquisition?

Wondering what to make of Omnicom Group's stock right now? You are not alone. Investors have seen shares sit at about $78.50 recently, shaking off some volatility but also raising eyebrows after a year marked by shifting sentiment across the advertising sector. While the stock is down 19.4% over the past year and has struggled a bit in 2024 with a 9.2% year-to-date drop, it is important not to overlook the bigger picture. In fact, if you zoom out, Omnicom has delivered a 75% return over five years. That is before even factoring in dividends.

The market’s current risk perception around ad spend and digital disruption has given Omnicom’s price movement some extra twists and turns lately, with a modest dip of 0.8% in the past week and a 1.2% slip over the last month. Still, this recent weakness comes after a multi-year run where Omnicom proved it can adapt to new trends and cyclical bumps. Given that, should you see this as a rare value play or a company facing more fundamental headwinds?

Digging into the numbers, Omnicom lands a valuation score of 6, meaning it looks undervalued in every one of the six key checks typically used by analysts. We will break down these metrics, covering everything from price-to-earnings to cash flow, to show exactly why that number stands out. And at the end, we'll share a smarter, more holistic way to view valuation that might just change how you look at stocks like Omnicom for good.

Why Omnicom Group is lagging behind its peers

Approach 1: Omnicom Group Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model estimates what a company is worth today by projecting its future cash flows and then discounting them back to their present value. This approach focuses on how much cash Omnicom Group is expected to generate in the years ahead and adjusts those expectations to account for the time value of money.

For Omnicom Group, the most recent twelve months’ Free Cash Flow is $1.80 Billion. According to available forecasts, Free Cash Flow is projected to grow steadily, reaching around $2.61 Billion by 2035. The early forecasts come from analyst estimates spanning the next three to five years; later projections rely on algorithmic extrapolations.

Adding up all these discounted future cash flows using a 2 Stage Free Cash Flow to Equity model yields an intrinsic value of approximately $229.79 per share. With the stock trading near $78.50, this DCF suggests Omnicom Group is currently undervalued by about 65.8% compared to its fundamental value.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Omnicom Group.

Our Discounted Cash Flow (DCF) analysis suggests Omnicom Group is undervalued by 65.8%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Omnicom Group Price vs Earnings (PE)

For profitable companies like Omnicom Group, the Price-to-Earnings (PE) ratio is a widely used and effective valuation metric. Since Omnicom has consistent earnings power, the PE ratio allows investors to quickly assess how the market values its profitability.

A company’s PE ratio typically reflects investor expectations for future growth and perceived risk. High-growth, low-risk companies often command higher PE multiples, while slower-growing or riskier firms tend to trade at lower valuations. What qualifies as a "fair" PE depends on those growth prospects, the company’s track record, and industry context.

Right now, Omnicom Group’s PE ratio stands at 11.0x. That is well below the Media industry average of 20.5x and also much lower than competitor peers, who average 44.7x. On the surface, this deep discount signals either lower market confidence or a potentially attractive entry point for value-minded investors.

Rather than only compare Omnicom’s PE ratio with broad peer or industry averages, the Simply Wall St "Fair Ratio" provides a more tailored yardstick. This metric accounts for critical factors such as Omnicom’s earnings growth, profit margins, risk profile, industry characteristics, and even its market capitalization. By using all these variables, the Fair Ratio helps filter out noise and gives a stronger sense of what multiple is actually justified.

Omnicom Group’s Fair Ratio is calculated at 20.8x, nearly double its current PE. This suggests that, factoring in Omnicom’s fundamentals and risk-adjusted expectations, the market is seriously undervaluing the business on earnings. Investors searching for discounted quality might want to take a closer look here.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Omnicom Group Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is simply your story behind the numbers; your personal view of Omnicom’s future, expressed through the assumptions you make about its revenue, earnings, margins, and what you think is a fair value for the company.

This approach links a company’s business story, such as new strategies or industry shifts, directly to a forecast of its financials, and then turns that into a fair value estimate. Best of all, Narratives are an easy, accessible tool available right now in the Community page on Simply Wall St, so millions of investors use them to share and compare perspectives.

By building or exploring Narratives, you can see how your outlook stacks up against others, and make more informed decisions about whether Omnicom’s stock is a buy or a sell by comparing each Narrative’s Fair Value to the current price. Narratives also adapt dynamically as news, earnings, or forecasts change, so your investment thesis always stays up to date.

For example, different investors on our platform see Omnicom perfectly positioned for global growth and set a fair value as high as $115, while others anticipate significant disruption and assign a fair value as low as $78, all based on their unique interpretations of Omnicom's future.

Do you think there's more to the story for Omnicom Group? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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