Story updated at 9:50 a.m. to reflect market activity.
Shares of Omnicom fell -0.5% to $71.94 in morning trading.
The analyst firm said the rating is a valuation call based on a $77 price target for the advertising agency.
Separately, TheStreet Ratings team rates OMNICOM GROUP as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:
"We rate OMNICOM GROUP (OMC) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year, growth in earnings per share, revenue growth, reasonable valuation levels and notable return on equity. We feel these strengths outweigh the fact that the company shows low profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- OMNICOM GROUP has improved earnings per share by 12.8% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, OMNICOM GROUP increased its bottom line by earning $3.72 versus $3.61 in the prior year. This year, the market expects an improvement in earnings ($4.22 versus $3.72).
- Despite its growing revenue, the company underperformed as compared with the industry average of 11.9%. Since the same quarter one year prior, revenues slightly increased by 6.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Media industry and the overall market, OMNICOM GROUP's return on equity significantly exceeds that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: OMC Ratings Report
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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.