Intrinsic value of Omnicom Group - OMC

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$83.25

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$83.25

 
Intrinsic value

$71.95

 
Up/down potential

-14%

 
Rating

hold

 
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*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 19.6

 

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
  2.10
  2.39
  2.65
  2.89
  3.10
  3.29
  3.46
  3.61
  3.75
  3.88
  3.99
  4.09
  4.18
  4.26
  4.34
  4.40
  4.46
  4.52
  4.56
  4.61
  4.65
  4.68
  4.71
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
Revenue, $m
  15,417
  15,741
  16,117
  16,544
  17,022
  17,549
  18,126
  18,753
  19,430
  20,159
  20,941
  21,776
  22,667
  23,614
  24,621
  25,689
  26,820
  28,017
  29,282
  30,619
  32,030
  33,518
  35,088
  36,742
  38,484
  40,320
  42,252
  44,285
  46,425
  48,675
  51,043
Variable operating expenses, $m
 
  10,779
  11,015
  11,284
  11,583
  11,914
  12,277
  12,670
  13,096
  13,553
  14,044
  13,671
  14,230
  14,825
  15,457
  16,127
  16,837
  17,588
  18,383
  19,222
  20,107
  21,042
  22,027
  23,066
  24,160
  25,312
  26,525
  27,801
  29,144
  30,557
  32,044
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
  13,762
  14,072
  14,418
  14,795
  15,206
  15,652
  16,129
  16,642
  17,187
  17,769
  17,489
  18,144
  18,836
  19,569
  20,342
  21,157
  22,016
  22,922
  23,874
  24,875
  25,930
  27,037
  28,201
  29,423
  30,707
  32,055
  33,469
  34,954
  36,512
  38,148
Operating income, $m
  2,009
  1,979
  2,044
  2,127
  2,226
  2,342
  2,475
  2,624
  2,789
  2,972
  3,172
  4,287
  4,523
  4,778
  5,053
  5,347
  5,663
  6,000
  6,361
  6,745
  7,154
  7,589
  8,051
  8,541
  9,061
  9,613
  10,197
  10,816
  11,470
  12,163
  12,895
EBITDA, $m
  2,302
  2,913
  2,979
  3,062
  3,163
  3,280
  3,414
  3,564
  3,732
  3,916
  4,118
  4,337
  4,576
  4,833
  5,109
  5,406
  5,725
  6,065
  6,428
  6,815
  7,227
  7,666
  8,131
  8,626
  9,150
  9,706
  10,294
  10,918
  11,577
  12,275
  13,013
Interest expense (income), $m
  570
  590
  296
  349
  409
  477
  551
  632
  721
  817
  920
  1,030
  1,148
  1,274
  1,407
  1,549
  1,700
  1,860
  2,029
  2,207
  2,396
  2,595
  2,805
  3,027
  3,261
  3,507
  3,766
  4,038
  4,326
  4,628
  4,945
Earnings before tax, $m
  1,842
  1,388
  1,748
  1,778
  1,817
  1,865
  1,924
  1,991
  2,068
  2,155
  2,252
  3,257
  3,376
  3,505
  3,645
  3,798
  3,963
  4,141
  4,332
  4,537
  4,758
  4,993
  5,245
  5,514
  5,801
  6,106
  6,431
  6,777
  7,145
  7,535
  7,950
Tax expense, $m
  601
  375
  472
  480
  491
  504
  519
  538
  558
  582
  608
  880
  911
  946
  984
  1,025
  1,070
  1,118
  1,170
  1,225
  1,285
  1,348
  1,416
  1,489
  1,566
  1,649
  1,736
  1,830
  1,929
  2,035
  2,146
Net income, $m
  1,149
  1,013
  1,276
  1,298
  1,326
  1,362
  1,404
  1,453
  1,510
  1,573
  1,644
  2,378
  2,464
  2,558
  2,661
  2,772
  2,893
  3,023
  3,162
  3,312
  3,473
  3,645
  3,829
  4,025
  4,235
  4,458
  4,695
  4,947
  5,216
  5,501
  5,803

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
  20,576
  21,068
  21,626
  22,251
  22,940
  23,694
  24,513
  25,399
  26,352
  27,373
  28,465
  29,630
  30,868
  32,184
  33,580
  35,058
  36,623
  38,277
  40,024
  41,869
  43,814
  45,866
  48,028
  50,306
  52,705
  55,231
  57,889
  60,686
  63,628
  66,723
Adjusted assets (=assets-cash), $m
  20,142
  20,576
  21,068
  21,626
  22,251
  22,940
  23,694
  24,513
  25,399
  26,352
  27,373
  28,465
  29,630
  30,868
  32,184
  33,580
  35,058
  36,623
  38,277
  40,024
  41,869
  43,814
  45,866
  48,028
  50,306
  52,705
  55,231
  57,889
  60,686
  63,628
  66,723
Revenue / Adjusted assets
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
Average production assets, $m
  1,070
  1,086
  1,112
  1,142
  1,174
  1,211
  1,251
  1,294
  1,341
  1,391
  1,445
  1,503
  1,564
  1,629
  1,699
  1,773
  1,851
  1,933
  2,020
  2,113
  2,210
  2,313
  2,421
  2,535
  2,655
  2,782
  2,915
  3,056
  3,203
  3,359
  3,522
Working capital, $m
  -1,289
  -4,376
  -4,481
  -4,599
  -4,732
  -4,879
  -5,039
  -5,213
  -5,402
  -5,604
  -5,822
  -6,054
  -6,301
  -6,565
  -6,845
  -7,141
  -7,456
  -7,789
  -8,140
  -8,512
  -8,904
  -9,318
  -9,754
  -10,214
  -10,699
  -11,209
  -11,746
  -12,311
  -12,906
  -13,532
  -14,190
Total debt, $m
  4,949
  2,465
  2,907
  3,410
  3,971
  4,592
  5,270
  6,008
  6,805
  7,663
  8,582
  9,565
  10,613
  11,728
  12,912
  14,168
  15,499
  16,907
  18,395
  19,968
  21,628
  23,379
  25,226
  27,172
  29,222
  31,381
  33,654
  36,046
  38,563
  41,211
  43,996
Total liabilities, $m
  21,003
  18,519
  18,961
  19,464
  20,025
  20,646
  21,324
  22,062
  22,859
  23,717
  24,636
  25,619
  26,667
  27,782
  28,966
  30,222
  31,553
  32,961
  34,449
  36,022
  37,682
  39,433
  41,280
  43,226
  45,276
  47,435
  49,708
  52,100
  54,617
  57,265
  60,050
Total equity, $m
  2,162
  2,058
  2,107
  2,163
  2,225
  2,294
  2,369
  2,451
  2,540
  2,635
  2,737
  2,847
  2,963
  3,087
  3,218
  3,358
  3,506
  3,662
  3,828
  4,002
  4,187
  4,381
  4,587
  4,803
  5,031
  5,271
  5,523
  5,789
  6,069
  6,363
  6,672
Total liabilities and equity, $m
  23,165
  20,577
  21,068
  21,627
  22,250
  22,940
  23,693
  24,513
  25,399
  26,352
  27,373
  28,466
  29,630
  30,869
  32,184
  33,580
  35,059
  36,623
  38,277
  40,024
  41,869
  43,814
  45,867
  48,029
  50,307
  52,706
  55,231
  57,889
  60,686
  63,628
  66,722
Debt-to-equity ratio
  2.289
  1.200
  1.380
  1.580
  1.780
  2.000
  2.220
  2.450
  2.680
  2.910
  3.140
  3.360
  3.580
  3.800
  4.010
  4.220
  4.420
  4.620
  4.810
  4.990
  5.170
  5.340
  5.500
  5.660
  5.810
  5.950
  6.090
  6.230
  6.350
  6.480
  6.590
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
  1,013
  1,276
  1,298
  1,326
  1,362
  1,404
  1,453
  1,510
  1,573
  1,644
  2,378
  2,464
  2,558
  2,661
  2,772
  2,893
  3,023
  3,162
  3,312
  3,473
  3,645
  3,829
  4,025
  4,235
  4,458
  4,695
  4,947
  5,216
  5,501
  5,803
Depreciation, amort., depletion, $m
  293
  934
  935
  936
  937
  938
  939
  941
  942
  944
  946
  50
  52
  54
  57
  59
  62
  64
  67
  70
  74
  77
  81
  85
  89
  93
  97
  102
  107
  112
  117
Funds from operations, $m
  2,254
  1,947
  2,211
  2,234
  2,263
  2,300
  2,343
  2,394
  2,452
  2,517
  2,590
  2,428
  2,516
  2,613
  2,718
  2,832
  2,955
  3,087
  3,230
  3,383
  3,547
  3,722
  3,910
  4,110
  4,323
  4,550
  4,792
  5,049
  5,323
  5,613
  5,921
Change in working capital, $m
  323
  -90
  -105
  -119
  -133
  -147
  -160
  -174
  -188
  -203
  -217
  -232
  -248
  -263
  -280
  -297
  -314
  -333
  -352
  -372
  -392
  -414
  -436
  -460
  -484
  -510
  -537
  -565
  -595
  -626
  -658
Cash from operations, $m
  1,931
  2,070
  2,316
  2,352
  2,396
  2,446
  2,504
  2,568
  2,640
  2,720
  2,807
  2,660
  2,764
  2,876
  2,998
  3,128
  3,269
  3,420
  3,581
  3,754
  3,939
  4,136
  4,346
  4,570
  4,808
  5,060
  5,329
  5,615
  5,917
  6,239
  6,579
Maintenance CAPEX, $m
  0
  -36
  -36
  -37
  -38
  -39
  -40
  -42
  -43
  -45
  -46
  -48
  -50
  -52
  -54
  -57
  -59
  -62
  -64
  -67
  -70
  -74
  -77
  -81
  -85
  -89
  -93
  -97
  -102
  -107
  -112
New CAPEX, $m
  -166
  -17
  -26
  -29
  -33
  -36
  -40
  -43
  -47
  -50
  -54
  -58
  -61
  -65
  -69
  -74
  -78
  -83
  -87
  -92
  -97
  -103
  -108
  -114
  -120
  -127
  -133
  -140
  -148
  -155
  -163
Cash from investing activities, $m
  -482
  -53
  -62
  -66
  -71
  -75
  -80
  -85
  -90
  -95
  -100
  -106
  -111
  -117
  -123
  -131
  -137
  -145
  -151
  -159
  -167
  -177
  -185
  -195
  -205
  -216
  -226
  -237
  -250
  -262
  -275
Free cash flow, $m
  1,449
  2,018
  2,253
  2,286
  2,325
  2,371
  2,424
  2,484
  2,551
  2,625
  2,707
  2,554
  2,652
  2,759
  2,874
  2,998
  3,132
  3,276
  3,430
  3,595
  3,771
  3,960
  4,161
  4,375
  4,603
  4,845
  5,103
  5,377
  5,668
  5,976
  6,304
Issuance/(repayment) of debt, $m
  388
  -2,455
  443
  503
  562
  620
  679
  738
  797
  858
  919
  983
  1,048
  1,115
  1,184
  1,256
  1,331
  1,408
  1,489
  1,573
  1,660
  1,751
  1,847
  1,946
  2,050
  2,159
  2,273
  2,392
  2,517
  2,648
  2,785
Issuance/(repurchase) of shares, $m
  -602
  334
  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
  -2,121
  443
  503
  562
  620
  679
  738
  797
  858
  919
  983
  1,048
  1,115
  1,184
  1,256
  1,331
  1,408
  1,489
  1,573
  1,660
  1,751
  1,847
  1,946
  2,050
  2,159
  2,273
  2,392
  2,517
  2,648
  2,785
Total cash flow (excl. dividends), $m
  902
  -438
  2,696
  2,788
  2,887
  2,991
  3,102
  3,221
  3,348
  3,483
  3,626
  3,537
  3,700
  3,874
  4,058
  4,254
  4,462
  4,684
  4,918
  5,167
  5,431
  5,711
  6,007
  6,321
  6,653
  7,004
  7,376
  7,769
  8,185
  8,624
  9,089
Retained Cash Flow (-), $m
  290
  -2,890
  -49
  -56
  -62
  -69
  -75
  -82
  -89
  -95
  -102
  -109
  -116
  -124
  -132
  -140
  -148
  -156
  -165
  -175
  -184
  -195
  -205
  -216
  -228
  -240
  -253
  -266
  -280
  -294
  -309
Prev. year cash balance distribution, $m
 
  2,994
  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
 
  0
  2,647
  2,733
  2,824
  2,922
  3,027
  3,139
  3,259
  3,387
  3,524
  3,428
  3,584
  3,750
  3,927
  4,115
  4,315
  4,527
  4,753
  4,993
  5,247
  5,516
  5,802
  6,105
  6,425
  6,764
  7,124
  7,504
  7,905
  8,330
  8,779
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
 
  0
  2,423
  2,378
  2,325
  2,265
  2,197
  2,121
  2,037
  1,946
  1,848
  1,628
  1,529
  1,426
  1,318
  1,208
  1,096
  985
  875
  769
  667
  571
  481
  400
  327
  263
  208
  161
  122
  91
  66
Current shareholders' claim on cash, %
  100
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0

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 17
Price to Sales 1.3
Price to Book 9
Price to Tangible Book
Price to Cash Flow 10.1
Price to Free Cash Flow 11.1
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 2.1% 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 -27.8%. 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 235.356 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 $19.6 billion.


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COMPANY NEWS

▶ Top 10 Advertising Agencies in NYC   [Apr-22-17 03:21PM  Insider Monkey]
▶ 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]
▶ Raymond James rolls out new ads for March Madness, U.S. Open   [Mar-09-17 02:20PM  at bizjournals.com]
▶ LatinWorks Strengthens Leadership Team   [Feb-20-17 11:48AM  PR Newswire]
▶ Omnicom Media Group Agencies Top Gunn Report For Media   [Feb-16-17 02:59PM  PR Newswire]
▶ Porter Novelli Names Three New Partners   [08:00AM  PR Newswire]
▶ Omnicom Group Markets Another Decent Quarter   [Feb-07-17 04:06PM  at Motley Fool]
▶ [$$] Omnicom's Profit, Revenue Increase   [07:37AM  at The Wall Street Journal]
▶ Omnicom Group Inc. Declares Dividend   [Feb-02-17 07:06PM  PR Newswire]
▶ 10 Biggest Advertising Agencies In The US   [Jan-27-17 03:10PM  at Insider Monkey]
▶ Mattel Focuses On Dad With New Barbie® Campaign   [Jan-23-17 09:00AM  PR Newswire]
▶ Ad Giants Omnicom and WPP Show Claws as Competition Heats up   [Jan-11-17 04:01PM  at The Wall Street Journal]
Stock chart of OMC Financial statements 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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