Sector financial performance:

It seems that the demand for sports entertainment in US market has been continuingly increasing in the past three years as indicated by increased revenue of media rights of sport leagues and as well the revenue from sponsorship and ad commission, and tickets of those companies in this sector. The demand for other entertainment events including concert, family shows, and performing arts has also increased during the same period of time as indicated by increased number of events hosted by the companies in this sector.

While the increased revenue/demand brings increased gross margin based on typical company’s data, companies seem to have to increase their spending in SG&A as a result of intensive competition for consumers and consolidation.

The typical price/sales ratio is 4.

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Company performance:

It seems that the revenue of entertainment events of this company has been increasing in the past two years as indicated by the organic growth of annual 8-10% annually. Revenue from its sport teams increased largely in 2017 primarily due to increased distribution in NBA league media rights and playoff games of NHL.

The first nine months of fiscal 2018 compared with the same period of 2017

Sport team revenue increased 2% due to increase in revenue of sponsorship and signage, ad commissions, tickets, media rights, suite rental fee, and concessions.

Organic entertainment revenue (excluding acquisition) increased 8%.

Fiscal 2017 compared with fiscal 2016

Sport team revenue increased 16% due to increase in revenue of league distribution (NBA), more playoff games (NHL), sponsorship and signage, as commissions, tickets, media rights, suite rental fee, and concessions.

Organic entertainment revenue (excluding acquisition) increased 10%.

Fiscal 2016 compared with fiscal 2015

Sport team revenue increased 6% due to increase in revenue of media rights (NBA), sponsorship and signage, as commissions, tickets, suite rental fee, and concessions.

Organic entertainment revenue (excluding acquisition) increased 1%.

Its gross margin (including direct operating costs and depreciation) has been up from about 22% to 30% of 2018. And with the larger increase in G&A as percentage of sales (to around 32%), its operating margin went down by a little to -2% in 2018.

Stock performance

This company is having price/sales ratio of 4 and enterprise price/EBITDA of 70. We think that its stock is being relatively overvalued.