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Omnicom Group (OMC) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

Explore Omnicom Group's strong financial position in 2023 with a Piotroski F-Score of 7/9, revealing profitability and positive cash flow amid economic challenges.

Knowledge hint:
The Piotroski F-Score is a number between 0 to 9 which reflects the strength of a company's financial position. It is based on 9 criteria involving profitability, liquidity, and leverage. This model helps investors identify stocks that are strong, undervalued investments.
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Short Analysis - Piotroski Score: 7

We're running Omnicom Group (OMC) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Criteria
Company has a positive net income?
1
Company has a positive cash flow?
1
Return on Assets (ROA) are growing?
1
Operating Cashflow are higher than Netincome?
1
Leverage is declining?
1
Current Ratio is growing?
0
Number of shares not diluted?
1
Cross Margin is growing?
0
Asset Turnover Ratio is growing?
1

We analyzed Omnicom Group (OMC) following the Piotroski 9-criteria scoring model. Omnicom scored 7 out of 9, indicating a solid financial position. The analysis assessed profitability, liquidity, and operating efficiency. Omnicom showed positive net income and operating cash flow, indicating profitability and earnings quality. It also showed a slight increase in Return on Assets (ROA), suggesting better operational efficiency. The cash flow from operations consistently exceeded net income, a positive sign of financial robustness. Leverage decreased by 14.66%, showing good debt management, and the number of shares reduced, indicating share buybacks. However, Omnicom had a reduced current ratio, and its gross margin slightly decreased, signaling potential short-term liquidity issues and operational cost challenges. Finally, the Asset Turnover ratio improved, suggesting better asset utilization.

Insights for Value Investors Seeking Stable Income

With a Piotroski score of 7, Omnicom Group (OMC) appears to be a strong and undervalued stock. The consistent profitability, positive cash flow, and reduced leverage all indicate a financially sound and resilient company. However, potential investors should keep an eye on the lower current ratio and decreasing gross margin, which might indicate short-term liquidity challenges and higher operational costs. Overall, given the robust financial indicators, Omnicom seems like a good investment opportunity, but it's important to remain cautious of the highlighted concerns.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Omnicom Group (OMC)

Company has a positive net income?

Net income indicates how much profit a company makes after subtracting all expenses from its revenues. Positive net income is essential for company growth.

Historical Net Income of Omnicom Group (OMC)

The net income of Omnicom Group (OMC) for 2023 is $1.303 billion, which is positive. Over the last 20 years, Omnicom has consistently shown profitability, with net income never dipping into negative territory. Notably, the net income spiked in 2018, reaching $1.326 billion, but slightly decreased the following years. Most recently, the company's net income slightly rose from $1.299 billion in 2022 to $1.303 billion in 2023. This slight but steady increase demonstrates financial resilience and efficient cost management, particularly impressive given the economic challenges posed by the global pandemic in recent years. Therefore, this trend is positive, and Omnicom Group earns 1 Piotroski point for this criterion.

Company has a positive cash flow?

Cash Flow from Operations (CFO) refers to the cash generated by a company's regular business operations. It is a key indicator of a company’s financial health as it shows the cash available for debt repayment, reinvestment, and dividends.

Historical Operating Cash Flow of Omnicom Group (OMC)

For the year 2023, Omnicom Group (OMC) reported a Cash Flow from Operations (CFO) of $1,421,900,000, which is positive. This receives a score of 1 point under the Piotroski F-Score criteria, indicating a positive trend. Over the past 20 years, OMC has consistently reported positive CFOs, though there was a notable dip in 2022 with a CFO of $926,500,000. The reversion to a higher CFO in 2023 suggests recovery and resilience in their operational cash flows, reinforcing a robust financial position.

Return on Assets (ROA) are growing?

Change in Return on Assets (ROA): Evaluating the year-over-year change in ROA is essential, as it measures the improvement in operational efficiency.

Historical change in Return on Assets (ROA) of Omnicom Group (OMC)

In 2023, Omnicom Group (OMC) reported a ROA of 0.0474, up slightly from 0.0469 in 2022. This increase, albeit marginal, indicates a positive trend in operational efficiency and earns Omnicom 1 point in the Piotroski score. Historically, Omnicom's ROA has been significantly lower than the industry's median, underlining inherent challenges in maximizing asset returns within its sector. For example, the industry's median ROA has fluctuated between 0.556 and 0.370 in the last 20 years, considerably higher than Omnicom's performance.

Operating Cashflow are higher than Netincome?

This criterion compares the operating cash flow and net income to gauge the quality of earnings.

Historical accruals of Omnicom Group (OMC)

In 2023, Omnicom Group's operating cash flow stood at $1.42 billion, surpassing its net income of $1.3 billion. This indicates strong earnings quality, as the company is generating more cash from its operations than it reports in net income. Such a positive cash flow can signal a healthy, financially robust company. Over the last 20 years, the trend shows that Omnicom has maintained substantial operating cash flows, often higher than net income, suggesting consistent earnings quality and translating to real cash benefits for the company. Therefore, Omnicom earns 1 point for this criterion.

Liquidity of Omnicom Group (OMC)

Leverage is declining?

Change in leverage assesses if a company is reducing its debt relative to equity, which indicates financial stability.

Historical leverage of Omnicom Group (OMC)

In 2022, Omnicom Group's leverage was 0.2399, compared to 0.2047 in 2023. This 14.66% decrease in leverage is a positive sign of financial stability, indicating that the company is effectively managing its debt. Over the last two decades, OMC's leverage reached a peak of 0.2503 in 2020 and a low of 0.1239 in 2009. The 2023 figure represents one of the lower leverage points in this period, underscoring OMC's prudent debt management. Therefore, according to the Piotroski score, a point is added for this criterion.

Current Ratio is growing?

The current ratio measures a company's ability to cover its short-term obligations with its current assets. It reflects short-term financial health and working capital efficiency.

Historical Current Ratio of Omnicom Group (OMC)

Comparing Omnicom Group's current ratio of 0.947 in 2023 to 0.9708 in 2022, there is a decrease rather than an increase. This indicates potential challenges in liquidity management or a differing strategy in asset allocation. Historically, Omnicom has maintained a current ratio below 1, often trailing the industry median. For instance, in 2020 their current ratio was 1.0042 compared to the industry's 1.2259, and in 2021 it was 0.9805 versus the industry's 1.3325. The decline in 2023 continues this trend, reflecting either tighter liquidity or more efficient use of assets, depending on operational context.

Number of shares not diluted?

Changes in outstanding shares can influence earnings per share (EPS), ownership dilution, and market perception.

Historical outstanding shares of Omnicom Group (OMC)

Omnicom Group (OMC) experienced a decrease in outstanding shares from 205,600,000 in 2022 to 199,400,000 in 2023. This reduction in outstanding shares is typically perceived positively as it suggests the company may be buying back its own stock, possibly indicating confidence in its future prospects or an effort to return value to shareholders. Historical data further shows a consistent decrease in shares over two decades, highlighting a disciplined approach to managing equity. Therefore, OMC earns 1 point in the Piotroski Analysis for decreasing shares in 2023.

Operating of Omnicom Group (OMC)

Cross Margin is growing?

Gross Margin compares a company's revenue to its cost of goods sold (COGS). It reflects how efficiently a company is producing its goods and managing its operational costs.

Historical gross margin of Omnicom Group (OMC)

For Omnicom Group (OMC), the Gross Margin in 2023 is 0.1844, which is marginally lower compared to 0.1876 in 2022. This indicates a slight decrease in operational efficiency or higher costs relative to sales. Consequently, based on this criterion, Omnicom should receive 0 points. It's notable that Omnicom's Gross Margin has fluctuated over the past 20 years, peaking at 0.279 in 2009 and experiencing a low of 0.1367 in 2004. Comparatively, the industry's median Gross Margin has always been significantly higher, peaking at 0.6298 in 2010. Despite the industry's general trend of higher margins, Omnicom's margin has remained below the industry median, reflecting either more competitive pricing or higher operational costs.

Asset Turnover Ratio is growing?

Change in Asset Turnover is a critical indicator of a company's operational efficiency. It measures how efficiently a company uses its assets to generate sales. An increase implies improved efficiency, while a decrease signifies the opposite.

Historical asset turnover ratio of Omnicom Group (OMC)

The Asset Turnover ratio for Omnicom Group (OMC) has increased from 0.5156 in 2022 to 0.5338 in 2023, reflecting an improvement in the company's ability to utilize its assets to generate revenue. This enhancement in the ratio is favorable and marks a positive trend, adding 1 point according to the Piotroski scoring model. Historically, the Asset Turnover ratio has shown fluctuations, peaking at 0.7302 in 2008 and dropping to its lowest at 0.484 in 2020. The recent uptick aligns with the company's efforts to optimize asset use, reflecting a commendable reversal from the low figures witnessed during the pandemic period.


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