Intrinsic value of Omnicom Group - OMC

Previous Close

$82.73

  Intrinsic Value

$146.89

stock screener

  Rating & Target

str. buy

+78%

  Value-price divergence*

-54%

Previous close

$82.73

 
Intrinsic value

$146.89

 
Up/down potential

+78%

 
Rating

str. buy

 
Value-price divergence*

-54%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of OMC stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 19.2

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  1.87
  2.50
  2.75
  2.97
  3.18
  3.36
  3.52
  3.67
  3.80
  3.92
  4.03
  4.13
  4.22
  4.29
  4.36
  4.43
  4.49
  4.54
  4.58
  4.62
  4.66
  4.70
  4.73
  4.75
  4.78
  4.80
  4.82
  4.84
  4.85
  4.87
  4.88
Revenue, $m
  15,417
  15,802
  16,237
  16,720
  17,251
  17,831
  18,459
  19,137
  19,865
  20,644
  21,477
  22,363
  23,306
  24,307
  25,368
  26,491
  27,679
  28,935
  30,261
  31,661
  33,137
  34,693
  36,332
  38,060
  39,878
  41,793
  43,807
  45,927
  48,157
  50,501
  52,967
Variable operating expenses, $m
 
  10,818
  11,091
  11,394
  11,728
  12,091
  12,486
  12,911
  13,368
  13,858
  14,380
  14,039
  14,631
  15,259
  15,925
  16,630
  17,376
  18,165
  18,997
  19,876
  20,802
  21,779
  22,809
  23,893
  25,035
  26,237
  27,501
  28,832
  30,232
  31,704
  33,251
Fixed operating expenses, $m
 
  2,983
  3,057
  3,134
  3,212
  3,292
  3,375
  3,459
  3,546
  3,634
  3,725
  3,818
  3,914
  4,011
  4,112
  4,215
  4,320
  4,428
  4,539
  4,652
  4,768
  4,888
  5,010
  5,135
  5,263
  5,395
  5,530
  5,668
  5,810
  5,955
  6,104
Total operating expenses, $m
  13,408
  13,801
  14,148
  14,528
  14,940
  15,383
  15,861
  16,370
  16,914
  17,492
  18,105
  17,857
  18,545
  19,270
  20,037
  20,845
  21,696
  22,593
  23,536
  24,528
  25,570
  26,667
  27,819
  29,028
  30,298
  31,632
  33,031
  34,500
  36,042
  37,659
  39,355
Operating income, $m
  2,009
  2,002
  2,089
  2,192
  2,312
  2,447
  2,599
  2,767
  2,951
  3,153
  3,371
  4,506
  4,761
  5,036
  5,331
  5,646
  5,983
  6,342
  6,725
  7,133
  7,566
  8,026
  8,514
  9,032
  9,580
  10,161
  10,776
  11,427
  12,115
  12,843
  13,612
EBITDA, $m
  2,302
  2,936
  3,024
  3,128
  3,249
  3,386
  3,539
  3,708
  3,894
  4,098
  4,318
  4,557
  4,815
  5,092
  5,389
  5,707
  6,047
  6,409
  6,795
  7,205
  7,642
  8,106
  8,598
  9,119
  9,672
  10,257
  10,877
  11,533
  12,226
  12,959
  13,733
Interest expense (income), $m
  570
  590
  536
  604
  679
  762
  852
  950
  1,056
  1,169
  1,291
  1,421
  1,559
  1,706
  1,862
  2,027
  2,202
  2,387
  2,583
  2,790
  3,008
  3,238
  3,480
  3,736
  4,005
  4,288
  4,587
  4,901
  5,231
  5,578
  5,944
Earnings before tax, $m
  1,842
  1,411
  1,553
  1,588
  1,632
  1,685
  1,746
  1,816
  1,895
  1,983
  2,081
  3,085
  3,203
  3,330
  3,469
  3,619
  3,781
  3,955
  4,142
  4,343
  4,558
  4,788
  5,034
  5,296
  5,575
  5,873
  6,190
  6,526
  6,884
  7,264
  7,668
Tax expense, $m
  601
  381
  419
  429
  441
  455
  471
  490
  512
  535
  562
  833
  865
  899
  937
  977
  1,021
  1,068
  1,118
  1,173
  1,231
  1,293
  1,359
  1,430
  1,505
  1,586
  1,671
  1,762
  1,859
  1,961
  2,070
Net income, $m
  1,149
  1,030
  1,133
  1,159
  1,192
  1,230
  1,275
  1,326
  1,383
  1,448
  1,519
  2,252
  2,338
  2,431
  2,532
  2,642
  2,760
  2,887
  3,024
  3,170
  3,327
  3,495
  3,675
  3,866
  4,070
  4,287
  4,518
  4,764
  5,025
  5,303
  5,597

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  3,023
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  23,165
  22,803
  23,430
  24,127
  24,894
  25,730
  26,637
  27,615
  28,665
  29,790
  30,991
  32,270
  33,631
  35,075
  36,606
  38,227
  39,941
  41,753
  43,667
  45,686
  47,816
  50,062
  52,428
  54,920
  57,544
  60,307
  63,214
  66,273
  69,490
  72,873
  76,431
Adjusted assets (=assets-cash), $m
  20,142
  22,803
  23,430
  24,127
  24,894
  25,730
  26,637
  27,615
  28,665
  29,790
  30,991
  32,270
  33,631
  35,075
  36,606
  38,227
  39,941
  41,753
  43,667
  45,686
  47,816
  50,062
  52,428
  54,920
  57,544
  60,307
  63,214
  66,273
  69,490
  72,873
  76,431
Revenue / Adjusted assets
  0.765
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
Average production assets, $m
  1,070
  1,090
  1,120
  1,154
  1,190
  1,230
  1,274
  1,320
  1,371
  1,424
  1,482
  1,543
  1,608
  1,677
  1,750
  1,828
  1,910
  1,997
  2,088
  2,185
  2,286
  2,394
  2,507
  2,626
  2,752
  2,884
  3,023
  3,169
  3,323
  3,485
  3,655
Working capital, $m
  -1,289
  -1,580
  -1,624
  -1,672
  -1,725
  -1,783
  -1,846
  -1,914
  -1,986
  -2,064
  -2,148
  -2,236
  -2,331
  -2,431
  -2,537
  -2,649
  -2,768
  -2,893
  -3,026
  -3,166
  -3,314
  -3,469
  -3,633
  -3,806
  -3,988
  -4,179
  -4,381
  -4,593
  -4,816
  -5,050
  -5,297
Total debt, $m
  4,949
  4,469
  5,033
  5,660
  6,350
  7,103
  7,919
  8,799
  9,745
  10,757
  11,838
  12,989
  14,214
  15,513
  16,891
  18,350
  19,893
  21,524
  23,246
  25,064
  26,981
  29,002
  31,131
  33,374
  35,736
  38,222
  40,839
  43,591
  46,487
  49,532
  52,734
Total liabilities, $m
  21,003
  20,523
  21,087
  21,714
  22,404
  23,157
  23,973
  24,853
  25,799
  26,811
  27,892
  29,043
  30,268
  31,567
  32,945
  34,404
  35,947
  37,578
  39,300
  41,118
  43,035
  45,056
  47,185
  49,428
  51,790
  54,276
  56,893
  59,645
  62,541
  65,586
  68,788
Total equity, $m
  2,162
  2,280
  2,343
  2,413
  2,489
  2,573
  2,664
  2,761
  2,867
  2,979
  3,099
  3,227
  3,363
  3,507
  3,661
  3,823
  3,994
  4,175
  4,367
  4,569
  4,782
  5,006
  5,243
  5,492
  5,754
  6,031
  6,321
  6,627
  6,949
  7,287
  7,643
Total liabilities and equity, $m
  23,165
  22,803
  23,430
  24,127
  24,893
  25,730
  26,637
  27,614
  28,666
  29,790
  30,991
  32,270
  33,631
  35,074
  36,606
  38,227
  39,941
  41,753
  43,667
  45,687
  47,817
  50,062
  52,428
  54,920
  57,544
  60,307
  63,214
  66,272
  69,490
  72,873
  76,431
Debt-to-equity ratio
  2.289
  1.960
  2.150
  2.350
  2.550
  2.760
  2.970
  3.190
  3.400
  3.610
  3.820
  4.030
  4.230
  4.420
  4.610
  4.800
  4.980
  5.160
  5.320
  5.490
  5.640
  5.790
  5.940
  6.080
  6.210
  6.340
  6.460
  6.580
  6.690
  6.800
  6.900
Adjusted equity ratio
  -0.041
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,149
  1,030
  1,133
  1,159
  1,192
  1,230
  1,275
  1,326
  1,383
  1,448
  1,519
  2,252
  2,338
  2,431
  2,532
  2,642
  2,760
  2,887
  3,024
  3,170
  3,327
  3,495
  3,675
  3,866
  4,070
  4,287
  4,518
  4,764
  5,025
  5,303
  5,597
Depreciation, amort., depletion, $m
  293
  934
  935
  936
  937
  939
  940
  942
  943
  945
  947
  51
  54
  56
  58
  61
  64
  67
  70
  73
  76
  80
  84
  88
  92
  96
  101
  106
  111
  116
  122
Funds from operations, $m
  2,254
  1,964
  2,068
  2,095
  2,129
  2,169
  2,215
  2,267
  2,327
  2,393
  2,466
  2,304
  2,392
  2,487
  2,591
  2,703
  2,824
  2,954
  3,094
  3,243
  3,404
  3,575
  3,758
  3,954
  4,162
  4,383
  4,619
  4,870
  5,136
  5,419
  5,719
Change in working capital, $m
  323
  -39
  -43
  -48
  -53
  -58
  -63
  -68
  -73
  -78
  -83
  -89
  -94
  -100
  -106
  -112
  -119
  -126
  -133
  -140
  -148
  -156
  -164
  -173
  -182
  -191
  -201
  -212
  -223
  -234
  -247
Cash from operations, $m
  1,931
  2,003
  2,112
  2,144
  2,182
  2,227
  2,278
  2,335
  2,400
  2,471
  2,549
  2,392
  2,486
  2,587
  2,697
  2,815
  2,943
  3,079
  3,226
  3,383
  3,551
  3,731
  3,922
  4,126
  4,344
  4,575
  4,821
  5,082
  5,359
  5,654
  5,966
Maintenance CAPEX, $m
  0
  -36
  -36
  -37
  -38
  -40
  -41
  -42
  -44
  -46
  -47
  -49
  -51
  -54
  -56
  -58
  -61
  -64
  -67
  -70
  -73
  -76
  -80
  -84
  -88
  -92
  -96
  -101
  -106
  -111
  -116
New CAPEX, $m
  -166
  -21
  -30
  -33
  -37
  -40
  -43
  -47
  -50
  -54
  -57
  -61
  -65
  -69
  -73
  -78
  -82
  -87
  -92
  -97
  -102
  -107
  -113
  -119
  -125
  -132
  -139
  -146
  -154
  -162
  -170
Cash from investing activities, $m
  -482
  -57
  -66
  -70
  -75
  -80
  -84
  -89
  -94
  -100
  -104
  -110
  -116
  -123
  -129
  -136
  -143
  -151
  -159
  -167
  -175
  -183
  -193
  -203
  -213
  -224
  -235
  -247
  -260
  -273
  -286
Free cash flow, $m
  1,449
  1,946
  2,045
  2,073
  2,107
  2,147
  2,193
  2,246
  2,305
  2,371
  2,444
  2,282
  2,369
  2,465
  2,568
  2,679
  2,800
  2,929
  3,068
  3,217
  3,377
  3,547
  3,729
  3,924
  4,131
  4,351
  4,585
  4,835
  5,100
  5,381
  5,679
Issuance/(repayment) of debt, $m
  388
  -451
  564
  627
  690
  753
  816
  880
  945
  1,012
  1,081
  1,151
  1,224
  1,300
  1,378
  1,459
  1,543
  1,631
  1,722
  1,818
  1,917
  2,021
  2,130
  2,243
  2,362
  2,486
  2,616
  2,753
  2,896
  3,045
  3,202
Issuance/(repurchase) of shares, $m
  -602
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -472
  -451
  564
  627
  690
  753
  816
  880
  945
  1,012
  1,081
  1,151
  1,224
  1,300
  1,378
  1,459
  1,543
  1,631
  1,722
  1,818
  1,917
  2,021
  2,130
  2,243
  2,362
  2,486
  2,616
  2,753
  2,896
  3,045
  3,202
Total cash flow (excl. dividends), $m
  902
  1,495
  2,610
  2,700
  2,797
  2,900
  3,009
  3,126
  3,251
  3,384
  3,525
  3,433
  3,594
  3,764
  3,945
  4,138
  4,343
  4,560
  4,790
  5,035
  5,294
  5,568
  5,859
  6,167
  6,492
  6,837
  7,202
  7,587
  7,995
  8,426
  8,882
Retained Cash Flow (-), $m
  290
  -1,014
  -63
  -70
  -77
  -84
  -91
  -98
  -105
  -112
  -120
  -128
  -136
  -144
  -153
  -162
  -171
  -181
  -191
  -202
  -213
  -225
  -237
  -249
  -262
  -276
  -291
  -306
  -322
  -338
  -356
Prev. year cash balance distribution, $m
 
  896
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  1,377
  2,547
  2,631
  2,720
  2,816
  2,919
  3,028
  3,146
  3,271
  3,405
  3,305
  3,458
  3,620
  3,792
  3,976
  4,171
  4,379
  4,599
  4,833
  5,081
  5,344
  5,622
  5,917
  6,230
  6,561
  6,911
  7,282
  7,673
  8,088
  8,526
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  1,320
  2,332
  2,289
  2,240
  2,183
  2,118
  2,046
  1,966
  1,879
  1,785
  1,570
  1,475
  1,376
  1,273
  1,167
  1,060
  953
  847
  744
  646
  553
  466
  388
  317
  255
  202
  156
  119
  88
  64
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Omnicom Group Inc., together with its subsidiaries, provides advertising, marketing, and corporate communications services. The company offers a range of services in the areas of advertising, customer relationship management, or CRM, public relations, and specialty communications. Its services comprise advertising, brand consultancy, content marketing, corporate social responsibility consulting, crisis communication, custom publishing, data analytics, database management, environmental design, financial/corporate business-to-business advertising, graphic arts/digital imaging, healthcare communications, and instore design services. The company’s services also include direct, entertainment, experiential, and field, interactive, mobile, multi-cultural, non-profit, promotional, retail, search engine, social media, and sports and event marketing services; and investor relations, marketing research, media planning and buying, organizational communications, package design, product placement, public affairs, public relations, and reputation consulting services. It operates in North America, Latin America, Europe, the Middle East, Africa, Australia, China, India, Japan, Korea, New Zealand, Singapore, and other Asian countries. Omnicom Group Inc. was founded in 1944 and is based in New York, New York.

FINANCIAL RATIOS  of  Omnicom Group (OMC)

Valuation Ratios
P/E Ratio 16.9
Price to Sales 1.3
Price to Book 9
Price to Tangible Book
Price to Cash Flow 10.1
Price to Free Cash Flow 11
Growth Rates
Sales Growth Rate 1.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -18.2%
Cap. Spend. - 3 Yr. Gr. Rate -4.8%
Financial Strength
Quick Ratio 104
Current Ratio 0.1
LT Debt to Equity 227.6%
Total Debt to Equity 228.9%
Interest Coverage 4
Management Effectiveness
Return On Assets 6.8%
Ret/ On Assets - 3 Yr. Avg. 6%
Return On Total Capital 16.3%
Ret/ On T. Cap. - 3 Yr. Avg. 15.4%
Return On Equity 49.8%
Return On Equity - 3 Yr. Avg. 41.8%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 25.7%
Gross Margin - 3 Yr. Avg. 25.5%
EBITDA Margin 17.5%
EBITDA Margin - 3 Yr. Avg. 15.8%
Operating Margin 13%
Oper. Margin - 3 Yr. Avg. 12.8%
Pre-Tax Margin 11.9%
Pre-Tax Margin - 3 Yr. Avg. 11.8%
Net Profit Margin 7.5%
Net Profit Margin - 3 Yr. Avg. 7.3%
Effective Tax Rate 32.6%
Eff/ Tax Rate - 3 Yr. Avg. 32.7%
Payout Ratio 44%

OMC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the OMC stock intrinsic value calculation we used $15417 million for the last fiscal year's total revenue generated by Omnicom Group. The default revenue input number comes from 2016 income statement of Omnicom Group. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our OMC stock valuation model: a) initial revenue growth rate of 2.5% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for OMC is calculated based on our internal credit rating of Omnicom Group, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Omnicom Group.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of OMC stock the variable cost ratio is equal to 68.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $2910 million in the base year in the intrinsic value calculation for OMC stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 12% for Omnicom Group.

Corporate tax rate of 27% is the nominal tax rate for Omnicom Group. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the OMC stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for OMC are equal to 6.9%.

Life of production assets of 33.8 years is the average useful life of capital assets used in Omnicom Group operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for OMC is equal to -10%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $2162 million for Omnicom Group - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 231.553 million for Omnicom Group is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Omnicom Group at the current share price and the inputted number of shares is $19.2 billion.

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COMPANY NEWS

▶ Omnicom Group Inc. Stays on Track   [Jul-21-17 09:00AM  Motley Fool]
▶ Omnicom tops Street 2Q forecasts   [12:21AM  Associated Press]
▶ What you need to know in advertising today   [12:00PM  Business Insider]
▶ MillerCoors gives DDB Chicago a big beer assignment   [Jul-18-17 01:50PM  American City Business Journals]
▶ Omnicom Group Inc. Declares Dividend   [Jul-13-17 06:26PM  PR Newswire]
▶ Alyson Tardif Appointed President of Colangelo   [Jul-11-17 02:27PM  PR Newswire]
▶ Iris Minnema Appointed Managing Director Of DDB Dubai   [Jun-26-17 11:50AM  PR Newswire]
▶ Hall & Partners launches OpenMind   [10:00AM  PR Newswire]
▶ Omnicom Media Group Agencies Stand Out At Cannes   [Jun-22-17 06:00AM  PR Newswire]
▶ ETFs with exposure to Omnicom Group, Inc. : June 15, 2017   [Jun-15-17 02:51PM  Capital Cube]
▶ BBDO is the Most Effective Agency Network in the World   [May-26-17 09:30AM  PR Newswire]
▶ Omnicom Group Inc. Declares Dividend   [May-25-17 04:05PM  PR Newswire]
▶ Porter Novelli Provides Guidance on Market Access   [May-24-17 08:00AM  PR Newswire]
▶ ETFs with exposure to Omnicom Group, Inc. : May 12, 2017   [May-12-17 04:18PM  Capital Cube]
▶ The Rise of Transparent Digital Ad Buying   [May-08-17 06:00AM  The Wall Street Journal]
▶ FleishmanHillard Announces Hong Kong Leadership Changes   [Apr-25-17 10:00AM  PR Newswire]
▶ McDonald's new ad agency finally has a chief creative officer   [Apr-24-17 03:15PM  American City Business Journals]
▶ Top 10 Advertising Agencies in NYC   [Apr-22-17 03:21PM  Insider Monkey]
▶ Omnicom Group, Inc. Takes a Cautious Look Ahead   [Apr-18-17 07:08PM  Motley Fool]
▶ Omnicom tops Street 1Q forecasts   [06:54AM  Associated Press]
▶ [$$] Advertisings Biggest Threat Isnt Digital Disruption   [12:20AM  The Wall Street Journal]
▶ Zimmerman Amps Social Power   [Apr-10-17 10:39AM  PR Newswire]
▶ [$$] Advertising's Biggest Threat Isn't Digital Disruption   [09:05AM  The Wall Street Journal]
▶ Critical Mass Appoints First Global Chief Client Officer   [Apr-05-17 09:22AM  Business Wire]
▶ The Integer Group® Named Digital AOR For World Kitchen   [Apr-04-17 08:00AM  PR Newswire]
Stock chart of OMC Financial statements of OMC Annual reports of OMC
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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