Dentsu (4324) AI Stock Analysis

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JP:4324 Dividends

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Dentsu

(OTC:4324)

50Neutral

Dentsu's overall stock score of 50 reflects significant challenges in profitability and international operations, as highlighted in the earnings call. While there is strong performance in the Japan segment, the company faces headwinds in international markets, impacting its financial health and stock performance. Technical indicators also suggest a bearish trend, and valuation metrics provide a mixed picture.

Dentsu (4324) vs. S&P 500 (SPY)

Market Cap

$770.29B

Dividend Yield4.94%

Average Volume (3M)1.32M

Price to Earnings (P/E)―

Beta (1Y)0.82

Revenue Growth8.20%

EPS Growth-1728.50%

CountryJP

Employees67,667

SectorCommunication Services

Sector Strength84

IndustryAdvertising Agencies

Share Statistics

EPS (TTM)-740.32

Shares Outstanding265,800,000

10 Day Avg. Volume896,130

30 Day Avg. Volume1,320,550

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)0.00

Price to Cash Flow (P/CF)0.00

P/FCF Ratio0.00

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$3,261.81

Price Target Upside10.12% Upside

Rating ConsensusModerate Sell

Number of Analyst Covering2

Dentsu Business Overview & Revenue Model

Company DescriptionDentsu Group Inc. is a leading global advertising and public relations company headquartered in Tokyo, Japan. It operates in the media and digital communications sector, offering a comprehensive range of services including advertising, branding, content creation, digital marketing, media planning and buying, public relations, and data analytics. Dentsu is known for its innovative approach to marketing and communications, serving a diverse portfolio of clients across various industries worldwide.

How the Company Makes MoneyDentsu makes money primarily through providing advertising and marketing services to businesses and organizations. Its revenue model is based on service fees for advertising campaigns, media buying, and strategic consulting. Key revenue streams include digital marketing services, traditional media advertising, and integrated marketing solutions. Dentsu also generates income from its data analytics and technology-driven services that help clients optimize their marketing strategies. The company has significant partnerships and collaborations with media companies, technology firms, and other agencies, which enhance its service offerings and contribute to its earnings by enabling it to provide comprehensive solutions to its clients.

Dentsu Financial Statement Overview

Summary

Dentsu faces significant profitability challenges, with negative net income and EBIT margins despite revenue growth. The balance sheet shows moderate leverage, but declining equity poses a risk. Cash flow generation is mixed, with operational cash flow providing some strength despite declining free cash flow growth.

Income Statement

―

The company's revenue has shown a modest growth rate of approximately 8% from 2023 to 2024, which is positive. However, the company is struggling with profitability, as evidenced by a negative net income in 2024, leading to negative net profit margins. The EBIT margin has also turned negative, indicating operational challenges. EBITDA margin is still positive, suggesting some operational cash flow strength, but overall profitability issues weigh down the score.

Balance Sheet

The balance sheet shows a manageable debt-to-equity ratio of approximately 0.79 in 2024, indicating a reasonable level of leverage. However, the decline in stockholders' equity over the years reflects financial strain. The equity ratio stands at around 19.9%, suggesting a moderate level of equity financing. While the company is not highly leveraged, the erosion of equity affects the overall strength of the balance sheet.

Cash Flow

―

The free cash flow has decreased from 2023 to 2024, indicating challenges in maintaining cash from operations. The operating cash flow to net income ratio is positive, highlighting the company's ability to generate cash despite negative net income. However, the free cash flow to net income ratio is also positive, which suggests some resilience, but declining free cash flow growth limits the score.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
1.41T	1.30T	1.24T	1.09T	939.24B
	Gross Profit
1.20T	1.14T	1.12T	976.58B	835.04B
	EBIT
-124.99B	128.73B	194.43B	150.95B	103.04B
	EBITDA
202.42B	139.50B	241.90B	302.49B	-32.61B
	Net Income Common Stockholders
-192.17B	-10.71B	59.85B	108.39B	-152.29B
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
371.99B	390.68B	622.47B	743.00B	542.85B
	Total Assets
3.51T	3.63T	3.74T	3.72T	3.38T
	Total Debt
547.27B	713.46B	532.43B	579.19B	584.81B
	Net Debt
175.28B	322.79B	-71.31B	-144.35B	54.12B
	Total Liabilities
2.74T	2.72T	2.79T	2.81T	2.56T
	Stockholders Equity
696.84B	841.65B	880.27B	845.03B	756.87B
Cash Flow		Free Cash Flow
34.30B	46.38B	62.37B	118.68B	66.84B
	Operating Cash Flow
59.98B	75.27B	80.90B	139.72B	88.31B
	Investing Cash Flow
-30.91B	-146.30B	-24.35B	262.23B	137.01B
	Financing Cash Flow
-65.71B	-153.68B	-188.19B	-232.19B	-96.62B

Dentsu Technical Analysis

Technical Analysis Sentiment

Negative

Last Price2962.00

Price Trends

50DMA

3132.54

Negative

100DMA

3411.81

Negative

200DMA

3814.62

Negative

Market Momentum

MACD

-55.96

Negative

RSI

45.38

Neutral

STOCH

70.10

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For JP:4324, the sentiment is Negative. The current price of 2962 is above the 20-day moving average (MA) of 2917.15, below the 50-day MA of 3132.54, and below the 200-day MA of 3814.62, indicating a neutral trend. The MACD of -55.96 indicates Negative momentum. The RSI at 45.38 is Neutral, neither overbought nor oversold. The STOCH value of 70.10 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for JP:4324.

Dentsu Peers Comparison

Overall Rating

UnderperformOutperform

Sector (59)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
9719	74 Outperform	¥1.29T	28.74		1.71%	24.10%	11.27%
4812	73 Outperform	¥373.50B	24.72		1.88%	7.49%	1.09%
9740	66 Neutral	¥38.33B	11.83		2.28%	5.01%	-39.80%
2433	63 Neutral	$397.76B	13.05	8.14%	3.02%	-2.48%	458.59%
Sector *	59 Neutral	$13.74B	7.33	-2.74%	3.82%	2.18%	-37.91%
4324	50 Neutral	$770.29B	―	-24.24%	4.94%	8.20%	-1728.50%
4755	46 Neutral	$1.79T	―	-18.23%	―	10.04%	57.36%

* Communication Services Sector Average

Performance Comparison

JP:4324

Dentsu

2,962.00

-1,147.78

-27.93%

JP:4812

DENTSU SOKEN INC.

5,740.00

375.58

7.00%

JP:9719

SCSK Corporation

4,142.00

1,266.08

44.02%

JP:9740

Central Security Patrols Co., Ltd.

2,627.00

-4.05

-0.15%

JP:4755

Rakuten

831.10

33.50

4.20%

JP:2433

Hakuhodo Dy Holdings

1,083.50

-345.98

-24.20%

Dentsu Earnings Call Summary

Earnings Call Date:Feb 14, 2025

(Q4-2024)

% Change Since: -15.68%|

Next Earnings Date:May 15, 2025

Earnings Call Sentiment Neutral

The earnings call reflected a mixed sentiment, with strong performance and growth in Japan and strategic plans for future improvements. However, significant challenges and losses in the international segment, especially due to goodwill impairment, weigh heavily on the overall outlook.

Q4-2024 Updates

Positive Updates

Japan Business Performance

The Japan business performed very well, with net revenue reaching a record high for the fourth consecutive year, and underlying operating profit also reaching a record high.

Improved Pitch Win Rate

The company's pitch win rate improved further in fiscal 2024, indicating strong momentum heading into 2025.

Shareholder Returns

The company completed a JPY 20 billion share buyback and maintained an annual dividend per share at JPY 139.5, the same amount as the previous year.

Net Revenue and Operating Margin

Net revenue increased by 5.7% year-on-year to JPY 1191.4 billion, and the operating margin improved by 30 basis points year-on-year to 14.8%, exceeding the November guidance by 80 basis points.

Sustainability and Industry Recognition

Dentsu was selected as a component of the DJSI World for the second consecutive year and named as a leader in the Forrester Wave Media Management Services.

Negative Updates

Goodwill Impairment Loss

The company recorded a goodwill impairment loss of JPY 210.1 billion in the international business in the fourth quarter, primarily related to EMEA but also affecting the Americas.

Significant Statutory Loss

A significant statutory loss was recorded for the year, with an operating loss of JPY 125 billion and a net loss of JPY 192.2 billion.

International Business Challenges

The international business faced challenges, with underperformance in the Americas and APAC remaining negative, and the U.K. and U.S. reporting negative organic growth.

CXM Segment Decline

The CXM segment continued to face challenging business conditions, resulting in a double-digit decline due to reduced client budgets and sales cycle delays.

Company Guidance

During the Dentsu FY 2024 earnings call, several metrics were highlighted in the guidance provided by the company's leaders. The organic growth rate for FY 2024 was reported at minus 0.1%, aligning with the November guidance. The fourth quarter saw an organic growth rate of 2.6%, indicating improvement. Net revenue increased by 5.7% year-on-year to JPY 1,191.4 billion, with underlying operating profit rising by 7.8% to JPY 176.2 billion. The company's consolidated full-year operating margin improved by 30 basis points year-on-year, resulting in a margin of 14.8%, exceeding previous guidance by 80 basis points. Despite these positive metrics, a significant statutory loss was recorded, driven by a goodwill impairment loss of JPY 210.1 billion, primarily affecting the EMEA and Americas regions. The goodwill impairment led to an operating loss of JPY 125 billion and a net loss of JPY 192.2 billion. However, the Japan business showed strong performance, achieving record high net revenue for the fourth consecutive year. Looking ahead, Dentsu aims for an organic growth rate of 4% and an operating margin of 16% to 17% by 2027, with a focus on restoring profitability and competitiveness through strategic investments and restructuring efforts.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.