Rotten Tomato Stocks
No Result
View All Result
  • News
    Pending Home Sales Declined in April to Two-Year Low

    Pending Home Sales Declined in April to Two-Year Low

    Glencore Pays up to $1.5B to Resolve Corruption Claims

    Glencore Pays up to $1.5B to Resolve Corruption Claims

    Slumping Technology Stocks Pull Wall Street Lower

    Slumping Technology Stocks Pull Wall Street Lower

    Asian Shares Mostly Lower as Inflation Worries Cloud Outlook

    Asian Shares Mostly Lower as Inflation Worries Cloud Outlook

  • NYSE
    Gap stock drops as Old Navy’s struggles sink sales and outlook

    Gap stock drops as Old Navy’s struggles sink sales and outlook

    Consolidated Edison Inc. stock falls Thursday, underperforms market

    Consolidated Edison Inc. stock falls Thursday, underperforms market

    Molina Healthcare (NYSE:MOH) Stock Price Down 3.5% Following Analyst Downgrade

    Molina Healthcare (NYSE:MOH) Stock Price Down 3.5% Following Analyst Downgrade

    Snowflake stock slides after earnings as company says macro issues are impacting some customer activity

    Snowflake stock slides after earnings as company says macro issues are impacting some customer activity

  • NASDAQ
    Workday stock drops after earnings miss, slightly higher outlook

    Workday stock drops after earnings miss, slightly higher outlook

    Gilead Sciences Inc. stock falls Thursday, underperforms market

    Gilead Sciences Inc. stock falls Thursday, underperforms market

    NVIDIA (NASDAQ:NVDA) Shares Gap Down After Analyst Downgrade

    NVIDIA (NASDAQ:NVDA) Shares Gap Down After Analyst Downgrade

    Nutanix stock dives more than 30% after earnings include poor forecast

    Nutanix stock dives more than 30% after earnings include poor forecast

  • OTC
    China Eastern Airlines 3Q Loss Widens on Low Travel Demand

    China Eastern Airlines 3Q Loss Widens on Low Travel Demand

    Corus Entertainment 4Q Profit Falls

    Corus Entertainment 4Q Profit Falls

    Nintendo Co. Ltd. ADR falls Monday, still outperforms market

    Nintendo Co. Ltd. ADR falls Monday, still outperforms market

    Ocado Group PLC Revenue of Ocado Retail in Q3 Fell 10.6%

    Ocado Group PLC Revenue of Ocado Retail in Q3 Fell 10.6%

  • TSX
    US Seeks to Fine Air Canada $25.5 Million Over Slow Refunds

    US Seeks to Fine Air Canada $25.5 Million Over Slow Refunds

    S&P/TSX composite falls on drop in materials sector, loonie tops 81 cents US

    S&P/TSX composite falls on drop in materials sector, loonie tops 81 cents US

    Bitcoin Is Falling: Should You Buy the Dip?

    Bitcoin Is Falling: Should You Buy the Dip?

    CN Rail Stock Is So Undervalued That it’s Absurd

    CN Rail Stock Is So Undervalued That it’s Absurd

  • News
    Pending Home Sales Declined in April to Two-Year Low

    Pending Home Sales Declined in April to Two-Year Low

    Glencore Pays up to $1.5B to Resolve Corruption Claims

    Glencore Pays up to $1.5B to Resolve Corruption Claims

    Slumping Technology Stocks Pull Wall Street Lower

    Slumping Technology Stocks Pull Wall Street Lower

    Asian Shares Mostly Lower as Inflation Worries Cloud Outlook

    Asian Shares Mostly Lower as Inflation Worries Cloud Outlook

  • NYSE
    Gap stock drops as Old Navy’s struggles sink sales and outlook

    Gap stock drops as Old Navy’s struggles sink sales and outlook

    Consolidated Edison Inc. stock falls Thursday, underperforms market

    Consolidated Edison Inc. stock falls Thursday, underperforms market

    Molina Healthcare (NYSE:MOH) Stock Price Down 3.5% Following Analyst Downgrade

    Molina Healthcare (NYSE:MOH) Stock Price Down 3.5% Following Analyst Downgrade

    Snowflake stock slides after earnings as company says macro issues are impacting some customer activity

    Snowflake stock slides after earnings as company says macro issues are impacting some customer activity

  • NASDAQ
    Workday stock drops after earnings miss, slightly higher outlook

    Workday stock drops after earnings miss, slightly higher outlook

    Gilead Sciences Inc. stock falls Thursday, underperforms market

    Gilead Sciences Inc. stock falls Thursday, underperforms market

    NVIDIA (NASDAQ:NVDA) Shares Gap Down After Analyst Downgrade

    NVIDIA (NASDAQ:NVDA) Shares Gap Down After Analyst Downgrade

    Nutanix stock dives more than 30% after earnings include poor forecast

    Nutanix stock dives more than 30% after earnings include poor forecast

  • OTC
    China Eastern Airlines 3Q Loss Widens on Low Travel Demand

    China Eastern Airlines 3Q Loss Widens on Low Travel Demand

    Corus Entertainment 4Q Profit Falls

    Corus Entertainment 4Q Profit Falls

    Nintendo Co. Ltd. ADR falls Monday, still outperforms market

    Nintendo Co. Ltd. ADR falls Monday, still outperforms market

    Ocado Group PLC Revenue of Ocado Retail in Q3 Fell 10.6%

    Ocado Group PLC Revenue of Ocado Retail in Q3 Fell 10.6%

  • TSX
    US Seeks to Fine Air Canada $25.5 Million Over Slow Refunds

    US Seeks to Fine Air Canada $25.5 Million Over Slow Refunds

    S&P/TSX composite falls on drop in materials sector, loonie tops 81 cents US

    S&P/TSX composite falls on drop in materials sector, loonie tops 81 cents US

    Bitcoin Is Falling: Should You Buy the Dip?

    Bitcoin Is Falling: Should You Buy the Dip?

    CN Rail Stock Is So Undervalued That it’s Absurd

    CN Rail Stock Is So Undervalued That it’s Absurd

No Result
View All Result
Rotten Tomato Stocks
No Result
View All Result

Is Omnicom Group (NYSE:OMC) Using Too Much Debt?

Editorial Staff by Editorial Staff
July 1, 2021
0
Is Omnicom Group (NYSE:OMC) Using Too Much Debt?

David Iben put it well when he said, ‘Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.’ It’s only natural to consider a company’s balance sheet when you examine how risky it is, since debt is often involved when a business collapses. We note that Omnicom Group Inc. (NYSE:OMC) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

What Risk Does Debt Bring?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. Ultimately, if the company can’t fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. The first step when considering a company’s debt levels is to consider its cash and debt together.

How Much Debt Does Omnicom Group Carry?

The image below, which you can click on for greater detail, shows that at March 2021 Omnicom Group had debt of US$5.44b, up from US$5.10b in one year. On the flip side, it has US$4.90b in cash leading to net debt of about US$543.0m.

debt-equity-history-analysis
NYSE:OMC Debt to Equity History July 1st 2021

How Strong Is Omnicom Group’s Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Omnicom Group had liabilities of US$13.5b due within 12 months and liabilities of US$8.24b due beyond that. On the other hand, it had cash of US$4.90b and US$6.63b worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by US$10.2b.

Omnicom Group has a very large market capitalization of US$17.2b, so it could very likely raise cash to ameliorate its balance sheet, if the need arose. But it’s clear that we should definitely closely examine whether it can manage its debt without dilution.

We measure a company’s debt load relative to its earnings power by looking at its net debt divided by its earnings before interest, tax, depreciation, and amortization (EBITDA) and by calculating how easily its earnings before interest and tax (EBIT) cover its interest expense (interest cover). The advantage of this approach is that we take into account both the absolute quantum of debt (with net debt to EBITDA) and the actual interest expenses associated with that debt (with its interest cover ratio).

Omnicom Group’s net debt is only 0.27 times its EBITDA. And its EBIT covers its interest expense a whopping 11.5 times over. So we’re pretty relaxed about its super-conservative use of debt. But the bad news is that Omnicom Group has seen its EBIT plunge 14% in the last twelve months. We think hat kind of performance, if repeated frequently, could well lead to difficulties for the stock. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if Omnicom Group can strengthen its balance sheet over time.

Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. So we clearly need to look at whether that EBIT is leading to corresponding free cash flow. During the last three years, Omnicom Group generated free cash flow amounting to a very robust 87% of its EBIT, more than we’d expect. That positions it well to pay down debt if desirable to do so.

Our View

Both Omnicom Group’s ability to to convert EBIT to free cash flow and its interest cover gave us comfort that it can handle its debt. But truth be told its EBIT growth rate had us nibbling our nails. Considering this range of data points, we think Omnicom Group is in a good position to manage its debt levels. But a word of caution: we think debt levels are high enough to justify ongoing monitoring. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet – far from it.

Related Posts

Gap stock drops as Old Navy’s struggles sink sales and outlook
NYSE

Gap stock drops as Old Navy’s struggles sink sales and outlook

May 26, 2022
Consolidated Edison Inc. stock falls Thursday, underperforms market
NYSE

Consolidated Edison Inc. stock falls Thursday, underperforms market

May 26, 2022
Molina Healthcare (NYSE:MOH) Stock Price Down 3.5% Following Analyst Downgrade
NYSE

Molina Healthcare (NYSE:MOH) Stock Price Down 3.5% Following Analyst Downgrade

May 26, 2022
Snowflake stock slides after earnings as company says macro issues are impacting some customer activity
NYSE

Snowflake stock slides after earnings as company says macro issues are impacting some customer activity

May 26, 2022
Load More
Next Post
Biden faces new heat to cancel $50K in student loan debt, keep payments frozen

Biden faces new heat to cancel $50K in student loan debt, keep payments frozen

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

I agree to the Terms & Conditions and Privacy Policy.

POPULAR NEWS

CNH Industrial (NYSE:CNHI) Use Of Debt Could Be Considered Risky

CNH Industrial (NYSE:CNHI) Use Of Debt Could Be Considered Risky

April 14, 2021
10 Warning Signs That Should Tell You “This Stock is in Trouble”

10 Warning Signs That Should Tell You “This Stock is in Trouble”

November 11, 2019
Ocado Group PLC Revenue of Ocado Retail in Q3 Fell 10.6%

Ocado Group PLC Revenue of Ocado Retail in Q3 Fell 10.6%

September 14, 2021
CN Rail Stock Is So Undervalued That it’s Absurd

CN Rail Stock Is So Undervalued That it’s Absurd

May 2, 2021
Nektar, worst performing stock in S&P 500, gets booted from the index

Nektar, worst performing stock in S&P 500, gets booted from the index

November 12, 2019

EDITOR'S PICK

Dow down 681 points on losses for JPMorgan Chase, Travelers stocks

Dow down 681 points on losses for JPMorgan Chase, Travelers stocks

February 24, 2022
Moderna Inc. stock falls Tuesday, underperforms market

Moderna Inc. stock falls Tuesday, underperforms market

November 10, 2021
Snap Inc. stock falls Tuesday, underperforms market

Snap Inc. stock falls Tuesday, underperforms market

February 22, 2022
U.S. retail sales slump 1.1% due to shortage of cars and Amazon Prime hangover

U.S. retail sales slump 1.1% due to shortage of cars and Amazon Prime hangover

August 18, 2021

Stay Updated

Get breaking news delivered straight into your inbox

Nothing in this publication should be considered as personalized financial advice. We are not licensed under securities laws to address your particular financial situation. No communication by our employees to you should be deemed as personalized financial advice. Please consult a licensed financial advisor before making any investment decision. This is a paid advertisement and is neither an offer nor recommendation to buy or sell any security. We hold no investment licenses and are thus neither licensed nor qualified to provide investment advice. The content in this report or email is not provided to any individual with a view toward their individual circumstances. Rotten Tomato stocks is a wholly-owned subsidiary of Grainne Capital Limited.
While all information is believed to be reliable, it is not guaranteed by us to be accurate. Individuals should assume that all information contained in our newsletter is not trustworthy unless verified by their own independent research. Also, because events and circumstances frequently do not occur as expected, there will likely be differences between the any predictions and actual results. Always consult a licensed investment professional before making any investment decision. Be extremely careful, investing in securities carries a high degree of risk; you may likely lose some or all of the investment.

Rotten Tomato Stocks cover the companies and markets that are declining, failing or headed for disaster. We help investors spot the down tends and recognize when something smells rotten.

RECENT POSTS

Pending Home Sales Declined in April to Two-Year Low

Gap stock drops as Old Navy’s struggles sink sales and outlook

Consolidated Edison Inc. stock falls Thursday, underperforms market

POPULAR POSTS

Molina Healthcare (NYSE:MOH) Stock Price Down 3.5% Following Analyst Downgrade

Workday stock drops after earnings miss, slightly higher outlook

Gilead Sciences Inc. stock falls Thursday, underperforms market

© Copyright 2021 RottenTomatoStocks. All Rights Reserved 

Disclaimer | Privacy Policy

No Result
View All Result
  • HOME
  • NEWS
  • NYSE
  • NASDAQ
  • OTC
  • TSX

© 2021 RottenTomatoStocks.com

error: Content is protected !!
This website uses cookies. By continuing to use this website you are giving consent to cookies being used. Visit our Privacy and Cookie Policy.