A Media Growth Story with Lots of Upside

Focus: STOCKS

Marc Gerstein Image Marc Gerstein Editor, Forbes Low-Priced Stock Report

Gaining a foothold in an underserved sector is one of the best ways to build a strong brand, and this company is well on its way to doing just that, writes Marc Gerstein of Forbes Low-Priced Stock Report.

Entravision Communications (EVC) owns 53 television stations and 48 radio stations that cater to Hispanic audiences (20 TV stations and 47 radio stations located within the top 50 US Hispanic markets), and it is likely to acquire more stations to add new territories and strengthen its position in regions in which it is already present.

Accordingly, this is a play on growth of the Hispanic segment of the population; numbers and buying power. But before addressing the demographic story, we have to consider an aspect of EVC some may find very challenging.

Like many media firms, EVC is extremely leveraged, with debt at $379.9 million on December 31 versus equity amounting to a deficit of $560,000. What’s more, it usually posts net losses.

Given the experience investors have had in this generation with wild and often inappropriate explanations of financial performance (see, e.g. pro forma, a concept widely and badly misused a decade ago), many don’t want to hear that in some cases, commonly accepted notions about what balance sheets and income statements should look like ought not apply.

But that doesn’t alter the reality, which for better or worse is that some businesses find it preferable to make debt a more prominent feature of their permanent capital structures.