With increasing car sales, more cars will roll off the line with factory-installed Sirius XM radios this coming year than ever before. Searching for new investment ideas, I’ll look at Cumulus Media (CMLS), Corus Entertainment (CJREF.PK), and Sirius XM Radio (SIRI).
Cumulus Media operates nearly 400 AM and FM radio stations in markets for example San Francisco, Dallas, Houston and Atlanta. The organization does not pay a dividend, nonetheless its surging gains in revenue and earnings match growth to offer a tempting investment.
The organization found itself at the center of an controversy when radio commentator Rush Limbaugh, an everyday on some Cumulus stations, made offensive on-air comments in regards to a female college student during his show. Many advertisers demanded their commercials be taken from the broadcast. While the uproar has been problematic, it could prove beneficial to Cumulus, as it prepares to debut a brand new show from ex-Arkansas Governor Mike Huckabee.
Powered through the acquisition and integration of rival Citadel, Cumulus saw its year-to-year earnings surge inside the 4th quarter of 2011, climbing over 510%. The organization appears to be poised for further gains in 2012, with analysts expecting earnings of $0.79 per share for the fiscal year.
While Cumulus Media enjoyed an excellent 2011, the company has some symptoms scattered throughout its financials. Its 4th quarter loss was the initial the company experienced in a year. Cumulus’ debts are mounting, and its particular $2.9 billion shortfall dwarfs its total cash of $47 million. Investors are most often growing weary, as noticed because they hold nearly 35% with the company’s stock float to put it briefly positions. Cumulus is not a portfolio-builder, but investors ready to accept some risk could profit nicely if the company can continue its upward climb.
Corus Entertainment is yet another interesting play in the media sector. This $1.83 billion Canadian company owns around 40 television stations, and lists networks like Nickelodeon, CMT along with the Oprah Winfrey Network among its assets. The inclusion of Winfrey’s network gets the potential to be especially appealing, giving Corus the chance to capitalize on the talk show host’s meteoric popularity along with the development of her unique Oprah’s Lifeclass Tour, which can be using a live tour and digital classrooms to achieve a growing audience.
Corus is already building on a solid performance in 2011, the location where the company saw revenues and earnings rise (up 6.6% and 5.9%, respectively), while share prices increased nearly 3%. The organization also recently purchased its Corus Quay building Toronto Port Lands Company and re-sold it to H&R REIT so that you can renegotiate its lease agreement.
Unlike Cumulus, Corus is a more stable investment proposition. The organization has not experienced the dizzying increase of Cumulus, but it has a low debt ratio (now at 57) and free income of nearly $523 million. The organization does not pay a dividend, nonetheless its projected growth of 9% this year will probably attract a number of investors seeking to enter the business segment.
Any conversation of alternate media eventually creates a discussion of Sirius XM Radio. The dominant satellite radio provider, this $8.7 billion clients are an interesting case study in short investing. Turning up cash (an expected $1.5 billion this coming year) as it accumulates debt (now over $3 billion), the proportion of Sirius shares held via short positions has soared to an incredible 26.7%. A number of analysts have attemptedto put a positive spin with this (calling it “short interest”); however, the more likely label should be risk. Many investors view Sirius being a speculative play. This is a reasonable conclusion, according to both the company’s high debt and its particular flat projections for the year ahead.
The prospects of an significant share price increase at Sirius are terrible at this time. The company carries a forward price to earnings ratio of 23 and its particular price to book of 12.5 suggests an overvalued position. The company’s relationship with the auto industry is a bright spot. As car sales carry on and increase, it is likely that more will roll off the showroom floor with factory-installed Sirius XM radios. Although company revenue did increase by 6.5% inside the 4th quarter, mounting debt could hamper any hint of an sustained rally.
As companies involved in broadcast media fight for share of the market and advertising dollars, folks have to look carefully for the best investments inside the sector. Since performance here depends on share price growth and not dividends, getting a company with stable increases and future expansion is more likely to bring long-term success.
I prefer Cumulus and Sirius for a small area of investors. People who have an appetite for risk could actually consider both companies, anticipating increases in stock price that outweigh the inherent difficulties with debt. For these investors, both companies are interesting. However, Cumulus definitely seems to be more appealing due to its higher upside.
For some people looking for a new holding, I suggest Corus Entertainment. The company has a lower threshold of debt, and its particular earnings have been steady. Should its relationship with Oprah Winfrey generate interest, the low P/E of 12 and reasonable price to book ratio suggest the stock has room to develop. There are still good investments in broadcast media, and investors should consider taking to the airwaves with Corus Entertainment, writes tagza.