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Local television stations are loving Decision 2012 as political advertising revenue has sharply increased. Gray Television, Inc. (GTN - Snapshot Report) has turned it around from an earnings loss in 2011 to being profitable in 2012. This Zacks #1 Rank (Strong Buy) remains extremely cheap, with a forward P/E of just 2.3.

Gray Television operates 36 television stations in 30 markets. The company, which is headquartered in Atlanta, has 17 channels affiliated with CBS, 10 channels with NBC, 8 channels with ABC and 1 channel on FOX.

Revenue Surged 16% In Q1

On May 2, Gray Television reported first quarter results of 4 cents a share. The Zacks Consensus had been looking for zero cents.

Revenue climbed to $80.7 million from $69.7 million in the year ago quarter. The quarter was boosted by political advertising revenue which soared 259%, and saw a new first quarter record, to $5 million.

It also saw increases in retransmission advertising, which rose 68% to $8.5 million and in Internet advertising which gained 34% to $5.7 million. Internet advertising benefited from an improving economy.

Outside of political advertising, its 5 largest local and national advertising categories saw the following increases in the first quarter compared with a year ago: automotive rose 8%; medical rose 15%; restaurant climbed 8%; communications surge 17% and furniture and appliances increased 5%.

Outlook For Q2

Revenue is expected to rise again year over year in the second quarter. Local revenue, excluding political advertising revenue, is expected to rise between 3% and 4%. National revenue is forecast to rise about 10% (again, excluding political revenue.)

Including political revenue, it is expected to rise 13%.

Political advertising revenue is expected to increase between 116% and 137% in the second quarter, or between $5 million and $5.5 million.

Analysts Revise Q2 Estimates Higher

In the last 30 days, 2 estimates out of 4 have been revised higher for 2012. The Zacks Consensus Estimate has moved to 63 cents, up from 61 cents in that time.

That is huge earning growth of 3,237% as the company actually lost 2 cents in 2011. That's a big turnaround.

Very Cheap Stock

Shares sold off during the Great Recession and haven't recovered much since.

But this has created a stock with all of the key value metrics.

In addition to a forward P/E of just 2.3, it also has a price-to-book of 0.6. A P/B ratio under 3.0 can mean there is value.

Its price-to-sales ratio is also flashing value. Its P/S ratio of just 0.2 is well under the 1.0 which can indicate value.

The company has other solid fundamentals as well, including a 1-year return on equity of 11.6%.

Yes, the stock is trading under $5 which I normally try and avoid. But with several analysts covering the company, I felt there are enough eyes looking at it.

This political season is injecting much needed cash into local television stations. Gray Television is one way for investors to cash in on campaign season.

Tracey Ryniec is the Value Stock Strategist for She is also the Editor of the Turnaround Trader and Insider Trader services. You can follow her on twitter at @TraceyRyniec.

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