Dentsu (4324) AI Stock Analysis

• Market Cap: $804.10B
• Dividend Yield: 3.99%
• Average Volume (3M): 1.26M
• Price to Earnings (P/E): ―
• Beta (1Y): 0.78
• Revenue Growth: 0.24%
• EPS Growth: -731.34%
• Country: JP
• Employees: 67,667
• Sector: Communication Services
• Sector Strength: 97
• Industry: Advertising Agencies
• EPS (TTM): 46.68
• Shares Outstanding: 265,800,000
• 10 Day Avg. Volume: 915,960
• 30 Day Avg. Volume: 1,261,200
• PEG Ratio: >-0.01
• Price to Book (P/B): 1.43
• Price to Sales (P/S): 0.71
• P/FCF Ratio: 29.08
• Enterprise Value/Market Cap: 1.36
• Enterprise Value/Revenue: 0.77
• Enterprise Value/Gross Profit: 0.92
• Enterprise Value/Ebitda: 9.07
• 1Y Price Target: $2,600.44
• Price Target Upside: -24.95% Downside
• Rating Consensus: Moderate Sell
• Number of Analyst Covering: 1
• EPS Forecast (FY): N/A
• Revenue Forecast (FY): N/A

• Rating: 58 Neutral
• Price Target: ¥3,608.00 ▲(4.13% Upside)

Dentsu's overall stock score is driven by its strong technical indicators, suggesting positive market momentum, despite being overbought. Financial performance is a concern due to declining revenues and profitability issues. Valuation is weak due to negative earnings, but the dividend yield offers some compensation. The earnings call highlights mixed results, with strong domestic performance overshadowed by international challenges.

Positive Factors

Strong Performance in Japan

Dentsu's consistent growth in Japan, marked by record-high net revenue and operating profit, underscores its robust market position and operational efficiency in its home market.

Cost Reduction and Efficiency Improvement

Dentsu's strategic cost-cutting measures and efficiency improvements are likely to enhance profitability and operational resilience, positioning the company for long-term financial stability.

New Client Wins and Industry Recognition

Winning new clients and receiving industry accolades reinforce Dentsu's competitive edge and ability to attract significant business, supporting sustained revenue growth.

Negative Factors

Negative Organic Growth

Negative organic growth indicates challenges in expanding the business, particularly in international markets, which could hinder long-term revenue prospects.

Goodwill Impairment Loss

The substantial goodwill impairment reflects overvaluation of past acquisitions, impacting financial health and signaling potential missteps in strategic investments.

Dividend Suspension

Suspending dividends due to financial strain may affect investor confidence and highlights the need for improved cash flow and profitability to support shareholder returns.

Dentsu Business Overview & Revenue Model

Company Description

Dentsu Group Inc. operates in the advertising business in Japan. The company offers advertising services, including newspapers, magazines, radio, television, internet, sales promotions, movies, out-of-home, public transportation, and other services. It is also involved in the consulting, development, and operation of information systems; sale of various software products; and provision of marketing and comprehensive network services. In addition, the company leases office buildings; and buys and sells real estate properties, as well as offers building and calculation services. Dentsu Group Inc. was founded in 1901 and is headquartered in Tokyo, Japan.

How the Company Makes Money

Dentsu generates revenue primarily through its advertising and marketing services, which are billed either on a project basis or through retainers with clients. Key revenue streams include fees from media buying, performance-based advertising, and digital marketing services. The company has formed significant partnerships with technology and data analytics firms, enhancing its capabilities in programmatic advertising and data-based marketing solutions. Additionally, Dentsu benefits from a growing demand for integrated marketing services, allowing it to capitalize on cross-selling opportunities across its segments. The company's global presence also enables it to attract multinational clients, further contributing to its earnings.

Dentsu Financial Statement Overview

Summary

Dentsu's financial performance is challenged by declining revenues and profitability issues, with a negative net profit margin and return on equity. While cash flow management shows some strength, the company needs to address operational inefficiencies to improve its financial health.

Income Statement

Dentsu's income statement reveals significant challenges, with a declining revenue growth rate of -65.3% in TTM, indicating a severe contraction. The net profit margin is negative at -13.45%, reflecting substantial losses. Despite a strong gross profit margin of 84.32%, the negative EBIT and EBITDA margins highlight operational inefficiencies. The company needs to address these profitability issues to improve its financial health.

Balance Sheet

The balance sheet shows a moderate debt-to-equity ratio of 0.85, suggesting manageable leverage. However, the return on equity is negative at -24.64%, indicating poor returns for shareholders. The equity ratio stands at 18.39%, reflecting a stable capital structure. Overall, while leverage is under control, the negative ROE is a concern.

Cash Flow

Cash flow analysis shows a positive free cash flow growth rate of 6.4% in TTM, indicating some improvement in cash generation. The operating cash flow to net income ratio is low at 0.086, suggesting weak cash conversion. However, the free cash flow to net income ratio is relatively strong at 0.85, indicating effective cash management despite net losses.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	1.41T	1.41T	1.30T	1.24T	1.09T	939.24B
Gross Profit	1.18T	1.20T	1.14T	1.12T	976.58B	835.04B
EBITDA	120.31B	-29.60B	139.50B	203.16B	302.49B	-32.61B
Net Income	-271.38B	-192.17B	-10.71B	59.85B	108.39B	-159.59B
Balance Sheet
Total Assets	3.15T	3.51T	3.63T	3.74T	3.72T	3.38T
Cash, Cash Equivalents and Short-Term Investments	369.24B	397.19B	390.68B	603.74B	723.54B	530.69B
Total Debt	559.43B	547.27B	713.46B	532.43B	579.19B	584.81B
Total Liabilities	2.50T	2.74T	2.72T	2.79T	2.81T	2.56T
Stockholders Equity	578.97B	696.84B	841.65B	880.27B	845.03B	756.87B
Cash Flow
Free Cash Flow	146.75B	34.30B	46.38B	62.37B	118.68B	66.84B
Operating Cash Flow	168.52B	59.98B	75.27B	80.90B	139.72B	88.31B
Investing Cash Flow	5.24B	-43.33B	-159.44B	-36.37B	155.23B	126.12B
Financing Cash Flow	-81.59B	-53.30B	-140.54B	-176.17B	-125.19B	-85.73B

Dentsu Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 3465.00
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For JP:4324, the sentiment is Positive. The current price of 3465 is above the 20-day moving average (MA) of 3341.40, above the 50-day MA of 3233.26, and above the 200-day MA of 3094.63, indicating a bullish trend. The MACD of 93.99 indicates Negative momentum. The RSI at 62.78 is Neutral, neither overbought nor oversold. The STOCH value of 64.87 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for JP:4324.

Dentsu Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
4293	77 Outperform	¥87.63B	23.15	―	7.45%	-10.10%	-37.28%
2491	67 Neutral	¥21.94B	4.89	―	7.91%	-3.20%	34.08%
2461	63 Neutral	¥33.60B	26.18	―	4.98%	3.22%	13.97%
4751	62 Neutral	$701.56B	22.15	18.07%	1.24%	9.09%	98.11%
Sector *	60 Neutral	$48.67B	4.58	-11.27%	4.14%	2.83%	-41.78%
4324	58 Neutral	$804.10B	-2.96	-34.34%	3.99%	0.24%	-731.34%
2433	58 Neutral	$428.60B	26.70	3.96%	2.77%	-8.56%	-47.89%

Dentsu Corporate Events

Dentsu’s Earnings Call: Mixed Results and Strategic Moves

The recent earnings call for Dentsu Group Inc. painted a picture of mixed performance, with strong results in Japan contrasting with ongoing challenges in the international business. While Japan achieved record-high net revenue and operating margins, the international segments struggled with negative organic growth and a significant goodwill impairment loss. The company’s strategic initiatives focusing on cost reduction and efficiency improvements were highlighted as positive steps, yet these efforts are overshadowed by the difficulties faced abroad.