Dentsu (4324) AI Stock Analysis

• Market Cap: ¥864.43B
• Dividend Yield: 4.2%
• Average Volume (3M): 1.26M
• Price to Earnings (P/E): ―
• Beta (1Y): 0.76
• 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: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: N/A
• Price Target Upside: N/A
• Rating Consensus: N/A
• Number of Analyst Covering: 0
• EPS Forecast (FY): N/A
• Revenue Forecast (FY): N/A

• Rating: 51 Neutral
• Price Target: ¥3,442.00 ▲(0.50% Upside)

Dentsu's overall stock score is primarily impacted by its challenging financial performance, with negative profitability and declining cash flows. The technical analysis provides some positive signals with a bullish trend, but the valuation is hampered by a negative P/E ratio. The high dividend yield offers some appeal, but strategic improvements are necessary for a stronger financial outlook.

Positive Factors

Strong Gross Profit Margin

A strong gross profit margin indicates effective cost management in production, providing a cushion against revenue fluctuations and supporting long-term profitability.

Global Presence

Dentsu's global reach allows it to tap into diverse markets, providing resilience against regional economic downturns and enhancing revenue stability.

Integrated Marketing Services

The ability to offer integrated services positions Dentsu to meet comprehensive client needs, fostering deeper client relationships and driving sustainable revenue growth.

Negative Factors

Declining Revenue

A decline in revenue suggests potential challenges in market demand or competitive pressures, which could impact long-term growth prospects if not addressed.

Negative Net Profit Margin

A negative net profit margin indicates ongoing losses, which can erode shareholder value and limit the company's ability to reinvest in growth opportunities.

Declining Free Cash Flow

A significant decline in free cash flow limits the company's ability to fund operations and strategic initiatives, potentially impacting long-term financial health.

Dentsu Business Overview & Revenue Model

Company Description

Dentsu Group Inc. (TSE: 4324) is a global advertising and marketing services company headquartered in Tokyo, Japan. The company operates through various segments, including Digital, Media, and Creative, providing a comprehensive range of services such as advertising, media planning and buying, digital transformation, customer relationship management, and public relations. Dentsu serves a diverse clientele across numerous industries, leveraging data-driven insights and innovative strategies to enhance brand visibility and consumer engagement.

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 faces significant financial challenges, with declining revenues and profitability issues. While the balance sheet shows manageable leverage, the negative return on equity is concerning. Cash flow management appears effective, but the company needs to address its operational inefficiencies and improve profitability to enhance its financial position.

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	1.40T	1.41T	1.30T	1.24T	1.09T	939.24B
Gross Profit	1.19T	1.20T	1.14T	1.12T	976.58B	835.04B
EBITDA	145.91B	-29.60B	139.50B	203.16B	302.49B	-32.61B
Net Income	-255.21B	-192.17B	-10.71B	59.85B	108.39B	-159.59B
Balance Sheet
Total Assets	3.12T	3.51T	3.63T	3.74T	3.72T	3.38T
Cash, Cash Equivalents and Short-Term Investments	224.96B	397.19B	390.68B	603.74B	723.54B	530.69B
Total Debt	502.82B	547.27B	713.46B	532.43B	579.19B	584.81B
Total Liabilities	2.45T	2.74T	2.72T	2.79T	2.81T	2.56T
Stockholders Equity	594.21B	696.84B	841.65B	880.27B	845.03B	756.87B
Cash Flow
Free Cash Flow	144.87B	34.30B	46.38B	62.37B	118.68B	66.84B
Operating Cash Flow	171.51B	59.98B	75.27B	80.90B	139.72B	88.31B
Investing Cash Flow	-10.38B	-43.33B	-159.44B	-36.37B	155.23B	126.12B
Financing Cash Flow	-165.99B	-53.30B	-140.54B	-176.17B	-125.19B	-85.73B

Dentsu Technical Analysis

• Technical Analysis Sentiment: Neutral
• Last Price: 3425.00
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Positive
• 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 Neutral. The current price of 3425 is above the 20-day moving average (MA) of 3402.30, above the 50-day MA of 3279.24, and above the 200-day MA of 3109.26, indicating a neutral trend. The MACD of 9.99 indicates Positive momentum. The RSI at 47.12 is Neutral, neither overbought nor oversold. The STOCH value of 58.17 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral 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	¥93.29B	24.71	―	7.03%	-10.10%	-37.28%
2491	67 Neutral	¥21.91B	4.95	―	7.85%	-3.20%	34.08%
2461	63 Neutral	¥34.79B	24.55	―	5.08%	3.22%	13.97%
Sector *	60 Neutral	$48.67B	4.58	-11.27%	4.14%	2.83%	-41.78%
4751	58 Neutral	¥668.13B	21.43	18.07%	1.27%	9.04%	94.01%
2433	58 Neutral	$424.56B	26.60	3.96%	2.77%	-8.56%	-47.89%
4324	51 Neutral	¥864.43B	-3.39	-34.34%	4.20%	0.24%	-731.34%

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.