Sector financial performance:

This company, which primarily operates radio broadcast stations earning revenue from advertising, has been grouped into radio broadcast service sector in video &audio goods and service industry.

It seems that demand for radio advertising of companies in this sector has been weak and declining as indicated by continuingly decreasing local ad revenue of those companies in the past three years.

The decrease in revenue has been hurting profitability of companies and we thus see the cash flow continuingly decrease as revenue and margin went down. To maintain the growth in their cash flow and improve profitability, companies in this sector have tried to sell their low profitable radio stations and acquire high performance radio stations, a strategy, which seems to help slow down the decline in margin and cash flow in the first few of months of 2018.

The typical company in this sector has a gross margin of 19%, a SG&A as percentage of sales of about 7%, and operating margin of 13%.

The typical enterprise price/sales ratio is 25(12 months trailing).

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Company performance:

It seems that demand for advertising service of broadcasting radio of this company has been weak and present a declining trend in the past three years.  

The first quarter of fiscal 2018 compared with 2017(ended Mar 31, 2018) 

Organic revenue decreased in low single digit due to weak advertising demand.

Fiscal 2017 compared with fiscal 2016

Organic revenue was flat.

Fiscal 2016 compared with fiscal 2015

Its gross margin has been down significantly to about 19% in 2018 (12 month trailing). With slightly decreased SG&A as percentage of sales (7%), we have seen that its operating margin was largely down to 12% in 2018.

Stock performance

Currently this company has an enterprise price/EBI ratio of about 48(12 month trailing). We think this stock may be overvalued compared with its peer considering its debt burden.