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 local TV ad service 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. Non-political ad revenue seems to be declining.
The first quarter of fiscal 2018 compared with 2017(ended Mar 31, 2018)
Local TV revenue increased about 3% driven by increase of 7% in retransmission from paid TV network and OTT. Non-political ad revenue was flat.
Fiscal 2017 compared with fiscal 2016
Local TV revenue decreased about 7% driven by decrease of 1.3% in non-political ad revenue offset by increase of 18% in retransmission from paid TV network and OTT. Political ad revenue decreased.
Fiscal 2016 compared with fiscal 2015
Local TV revenue increased about 31% driven by increase of 4% in non-political ad revenue and increase of 61% in retransmission from paid TV network and OTT. Political ad revenue increased.
Its gross margin (programing costs excluding staffing) has been down to about 66% from about 75% in 2018 (12 month trailing) due to continuingly increased programing costs (affiliation fees). With improved SG&A as percentage of sales (about 62%,inlucidng staffing expenses)), we have seen that its operating margin was flat at about 5% 2018.
Stock performance
Currently this company has an enterprise price/sales ratio of about 72(12 month trailing). We think this stock may be overvalued compared with its peers.
