- Market demand for Over-the-top services is projected to grow at a substantial rate over the next few years and TEGNA is strategically shifting into this space. OTT will be a big money maker for TGNA and they are prioritizing this aspect of their business.
- TGNA is undervalued and has at least a 30% upside, even with the significant ump in revenue they saw YoY due to COVID
- With the launch of Twist network and continued push into the OTT space, TGNA is well positioned to take advantage of strong growth prospects to continue to strengthen its balance sheet and increase shareholder value
The market for broadcasting services is growing and the OTT market is growing at an even faster rate. TGNA is well established in the broadcasting space and has started to shift into the OTT space which has resulted in strong revenues. This market will continue to grow even past COVID
- Television broadcasting services market size is valued at USD 871.9 billion by 2027 and is expected to grow at a compound annual growth rate of 7.6% in the forecast period of 2020 to 2027. here
- Over-the-top Market was valued at USD 122.27 Billion in 2018 and is projected to reach USD 382.15 Billion by 2026, growing at a CAGR of 16.56 % from 2019 to 2026. here
Company Overview: TEGNA, Inc. is an innovative media company, which serves the greater good of its communities through empowering stories, impactful investigations and innovative marketing services. It operates 62 television stations and 4 radio stations in 51 markets from coast to coast. TEGNA is the owner of 4 affiliates in the top 25 markets among independent station groups, reaching approximately 39 percent of all television households nationwide. It also owns multicast networks Justice Network and Quest. TEGNA Marketing Solutions offers innovative solutions to help businesses reach consumers across television, email, social and over-the-top (OTT) platforms, including Premion, TEGNAS OTT advertising service. The company was founded by Frank E. Gannett in 1906 and is headquartered in Tysons, VA.
What is OTT? An over-the-top (OTT) media service is a media service offered directly to viewers via the Internet. OTT bypasses cable, broadcast, and satellite television platforms, the types of companies which traditionally act as controllers or distributors of such content
April 5, 2021 – Press Release – Twist, a here
- TEGNA Inc. (NYSE: TGNA) today announced the debut of Twist, its women-oriented multicast channel featuring lifestyle and reality programming.
- Audiences craving lifestyle and reality programming, who have been underserved in the multicast space, now have free access to high quality shows that have never before been available over-the-air.”
March 26, 2021 – Letter to shareholders here
- Significant growth in their OTT business – which is a growing market. “This subscription growth is coupled with the success of our fast-growing OTT advertising business. Premion also had a record year in 2020 – growing revenue by more than 40 percent”
- “Since becoming a pure-play broadcast company, TEGNA has delivered significant value, with our two-year total shareholder return (TSR) of 34.5 percent outperforming the peer median of 1.1 percent”
- Share Repurchase Program: “In January, we announced that the Board authorized a three-year, $300 million share repurchase program reflecting TEGNA’s focus on delivering value to shareholders.” I see this a good thing. I’ve discussed my view of share buybacks before here
Summary – the P/E and PEG ratios look strong for TGNA, indicating good value currently and positive growth potential, especially when compared to its peers in the industry
- TGNA currently has a forward P/E ratio of 10.56 and a PEG ratio of 1.06. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate.
- TGNA has a P/B ratio of 2.08. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities
- TGNA earnings growth over the past year (68.3%) exceeded the Media industry -16.6%.
- TGNA is significantly below Fair Value. It is trading around $20 when writing this post and a 5 Year DCF has the fair Value Price of $27.89 for TGN. This is sensitive to inputs, but I used the base projections provided. You can check it out here
Summary – The D/E ratio is a bit high which is somewhat concerning, especially from a value investors perspective.
- TGNA's debt to equity ratio 1.7 is considered high. TGNA's debt to equity ratio has increased from 1.6 to 1.7 over the past 5 years. While this is considered high it is not too far off from the industry average D/E ratio of 1.43 here
- Short Term Liabilities: TGNA's short term assets ($672.6M) exceed its short-term liabilities ($424.2M) or its long term liabilities ($4.4B). source
- Uncooperative/opportunistic hedge fund owns 7% of TGNA: Standard General is a hedge fund and holds 7% of TGNA. As per Wikipedia, “Standard General pursues a single strategy of opportunistic investing primarily in levered U.S. middle-market companies. Since 2007, it has invested in both publicly traded and private entities and is known for making several control investments” here
- Competition There is a significant amount of competition in the broadcasting space and the OTT space. People has a ton of options to consume media and TGNA will need to ensure it stands out amongst the other players in the market
TGNA is an established broadcasting company that is keeping up with eh times and shifting into the OTT space. They are undervalued currently and have seen record growth for their OTT services, which is a rapidly growing market. If they can continue to expand in this space, and provide quality content that consumers demand, they will be well positioned for growth over the coming months and years.
Disclaimer: This is not investment advice, do your own research!