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 local TV ad service fluctuated and was flat in long run depending on political election and sport events. The revenue growth of this company seems to have been driven by revenue from paid TV and OTT network.
The first quarter of fiscal 2018 compared with 2017(ended Mar 31, 2018)
Net revenue increased 9% driven by increase of 5% in ad revenue and increase of 13% in subscription from paid TV network and OTT.
Fiscal 2017 compared with fiscal 2016
Net revenue decreased 5% driven by decrease of about 16% in ad revenue offset by increase of 24% in subscription from paid TV network and OTT.
Fiscal 2016 compared with fiscal 2015
Net revenue increased 14% driven by increase of about 12% in ad revenue offset by increase of 30% in subscription from paid TV network and OTT.
Its gross margin has been down significantly to about 47% from about 54% in 2018 (12 month trailing) due to continuingly increased programing costs. However, due to reduced expenses related to marketing, this company’s SG&A as percentage of sales decreased to about 18%. And we have seen that its operating margin was down to 29% in 2018.
Currently this company has an enterprise price/sales ratio of about 15(12 month trailing). We think this stock may be fairly valued compared with its peers at current situation.
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