GTN GRAY TELEVISION, INC
Sector financial performance:
This company, which primarily owns and operates television 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).
It seems that the demand for commercial TV ad service has been declining fast in the past three years. Political ad revenue fluctuated depending on political election cycle. The revenue growth of this company seems to have been driven by revenue from paid TV and OTT network but the growth has been slowing.
The first quarter of fiscal 2018 compared with 2017(ended Mar 31, 2018)
Total organic revenue increased about 6% driven by increase in political ad revenue and increase in retransmission. Commercial ad revenue increased due to special sport events.
Fiscal 2017 compared with fiscal 2016
Total organic revenue decreased about 4% driven by decrease in political ad revenue and decrease in commercial ad revenue offset by increase in retransmission.
Fiscal 2016 compared with fiscal 2015
Total organic revenue increased about 4.5% driven by increase in political ad revenue and increase in retransmission offset by decrease in commercial ad revenue.
Its gross margin has been down to about 28% from about 31% in 2018 (12 month trailing) due to continuingly increased programming costs (affiliation fees) and acquisition. With improved SG&A as percentage of sales (about 3%), we have seen that its operating margin was slightly down to about 25% in 2018.
Currently this company has an enterprise price/sales ratio of about 22(12 month trailing). We think this stock may be overvalued compared with its peers,
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