EVC Entravision

Sector financial performance:

This company, which primarily owns and operates Hispanic television stations and radio stations earning revenue from advertising and re-transmission fees of paid network, has been grouped into TV station service sector in video &audio goods and service industry.
It seems that demand for local TV AD service that companies in this sector provide has been weak and declining in the past three years as a result of ad’s moving away from traditional TV media. Increasing retransmission fees, as a result of increasing rate, seems to offset the decrease in commercial ad revenue. However, it seems revenue of most companies in this sector may be declining. Political ad has been a strong revenue resource in this sector and helps maintain an about 3% annual growth rate in revenue in the past three years.
The struggling demand for commercial ad and increasing programing costs has been hurting those companies’ profitability. Increasing consolidation activities seem to help little in maintain their margins. The typical company in this sector has an about gross margin of 43% in 2018, with a SG&A as percentage of sales of about 27% , the typical  operating margin is 16% down about 600 basis points compared with that in 2015.
The typical enterprise price/EBI ratio is 34 (12 months trailing).

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Company performance:

It seems that the demand for local TV commercial ad service has been declining quickly in the past two years. The retransmission revenue from paid TV and OTT network has increased but the growth has been slowing. Political ad revenue fluctuated depending on political election cycle.
The first quarter of fiscal 2018 compared with 2017(ended Mar 31, 2018) 
Local TV revenue decreased about 8.5% driven by decrease in non-political ad revenue offset by increase in in retransmission from paid TV network and OTT and political ad revenue.
Fiscal 2017 compared with fiscal 2016
Local TV revenue decreased about 7% driven by decrease in local ad revenue and political ad revenue.
Fiscal 2016 compared with fiscal 2015
Local TV revenue increased about 7% driven by increase in political ad revenue.
Its gross margin (excluding revenue and expenses related to spectrum usage rights) has been down to about 35% from about 47% in 2018 (12 month trailing). With increased SG&A as percentage of sales (about 28%), we have seen that its operating margin was down to 7% in 2018.

Stock performance

Currently this company has an enterprise price/sales ratio of about 52(12 month trailing). We think this stock may be overvalued compared with its peers.

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