Local broadcasters have complained that their stocks are undervalued for years, and a new report seems to support their belief. Six pureplay broadcasters, including Belo, Fisher and Gray, averaged 9.6X EBITDA multiples as of September 30, reports the investment banking firm M.C. Alcamo & Co. That's down 10% from the 10.7X multiple they were valued at at the beginning of 2010.
The valuations were dimmer at the broadcast divisions within integrated media companies, such as Gannett, Media General and Meredith. Nine firms with TV among their various media holdings had a 5.9X multiple, finds Alcamo & Co., down a full 25% from the 8X multiple they had at the beginning of 2010.
President Michael Alcamo called investor interest in broadcast stocks "unduly anemic", and believes the sector is undervalued by 10%.
The firm noted that closing prices at the end of September indicated that on average, broadcast stocks traded at a level that was only 66% of the way through of their 52-week range, compared with 85% in January. The S&P 500 index, by contrast, closed at 94% of its 52-week range, up from 93% in January.
"Given the strong revenue recovery and improving cost situation at all major broadcasters, it seems incongruous that share prices should lag so far behind the broader index," said Alcamo. "The political season in 2010 should bring continued profit growth, and, broadcasters will go into 2011 in a position of strength. As the sector reports Q3 and Q4 profits, we expect share prices to revert upward to levels more consistent with historic trading patterns."