NEW YORK (TheStreet) -- Shares of Omnicom Group (OMC) are down -1.2% to $66.87 this afternoon as the advertising, marketing and corporate communications company struggles to keep its merger with Publicis Groupe (PUBGY) from falling apart.
The two firms have lost over $1.5 billion of client work in recent weeks and face a fight to retain billions more, including a huge Samsung (SSNLF) contract, Reuters reports.
With the deal's closing delayed at least six months because of regulatory issues, and relations so tense between the two that they haven't been able to solve a seven-month dispute over who becomes new finance chief, rivals been winning business from them and poaching their staff, according to Reuters.
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, revenue growth, growth in earnings per share, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Despite its growing revenue, the company underperformed as compared with the industry average of 3.9%. Since the same quarter one year prior, revenues slightly increased by 3.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- 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's earnings per share improvement from the most recent quarter was slightly positive. 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 ($4.07 versus $3.72).
- Even though the current debt-to-equity ratio is 1.09, it is still below the industry average, suggesting that this level of debt is acceptable within the Media industry. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.71 is weak.
- 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