On November 4, Gray Television shares dipped below the $9 mark. Today, they’re heading toward a 5% gain from Wednesday and were priced at $11.25 with 30 minutes remaining in Thursday’s trading.
Is the stock still “a bargain?” Financial blog Simply Wall St. sought the answer to that question.
And, the answer is good for investors.
“Gray Television is still trading at a fairly cheap price,” it notes, based on a comparison of the company’s price-to-earnings ratio to the industry average.
This was used, the blog says, “because there’s not enough visibility to forecast its cash flows.”
Simply Wall St. believes the stock’s ratio of 3.96x “is currently well-below the industry average of 12.02x, meaning that it is trading at a cheaper price relative to its peers. ”
However, given that Gray Television’s share is “fairly volatile,” with price movements that are magnified relative to the rest of the market, “this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.”
Then, there’s Gray’s visibility. Coming off a year of record political ad revenue, it’s not the greatest. “[W]ith a negative profit growth of -2.9% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Gray Television,” the financial blog says. “This certainty tips the risk-return scale towards higher risk.”
What does this mean for shareholders? “Although GTN is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. We recommend you think about whether you want to increase your portfolio exposure to GTN, or whether diversifying into another stock may be a better move for your total risk and return.”
What should potential investors consider? “If you’ve been keeping an eye on GTN for a while, but hesitant on making the leap, we recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.”
