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Does Gray Television Offer a Good Value Buying Opportunity?
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Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Gray Television, Inc. (GTN - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Gray Television has a trailing twelve months PE ratio of 13.42, as you can see in the chart below:
This level actually compares pretty favorably with the market at large as well, as the PE for the S&P 500 stands at about 20.43. If we focus on the PE trend, Gray Television’s current PE level puts it below its midpoint (which stands at 16.49) over the past three years and is also way below its high of 52.89 over the same time frame. This indicates that the stock is currently undervalued per its own historical trends.
Further, the stock’s PE also compares favorably with the Zacks classified Broadcasting – Radio/TV industry’s trailing twelve months PE ratio, which stands at 23.71. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Gray Television has a forward PE ratio (price relative to this year’s earnings) of 17.95, so it is fair to expect an increase in the company’s share price in the near future.
P/CF Ratio
An often overlooked ratio that can still be a great indicator of value is the price/cash flow metric. This ratio doesn’t take amortization and depreciation into account, so can give a more accurate picture of the financial health in a business. This is a preferred metric to some valuation investors because cash flows are (a) generally less prone to manipulation by the company’s management and (b) are less affected by variation in accounting policies between different companies.
The ratio is generally applied to find out whether a company’s stock is overpriced or underpriced with reference to its cash flows generation potential compared with its competitors. However, it is not commonly used for cross-industry comparison, as the average price to cash flow ratio varies from industry to industry.
In this case, Gray Television’s P/CF ratio of 7.10 is way lower than the Zacks classified Broadcasting – Radio/TV industry’s average of 32.25, which indicates that the stock is considerably undervalued at this point of time.
Broad Value Outlook
In aggregate, Gray Television currently has a Zacks Value Style Score of ‘A’, putting it into the top 20% of all stocks we cover from this look. This makes Gray Television a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, its P/S ratio (another great indicator of value) comes in at 1.23, which is comparatively better than the industry average of 1.55. Clearly, Gray Television is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Gray Television might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of ‘A’ and a Momentum score of ‘F’. This gives GTN a Zacks VGM score—or its overarching fundamental grade—of ‘B’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been quite bearish. The current quarter has seen two estimates go lower in the past sixty days compared to none higher. Similarly, the full year estimate has seen one downward and no upward revision in the same time period.
This has had a decidedly negative impact on the consensus estimate, as the current quarter consensus estimate has plunged 42.8% in the past two months, while the full year estimate has declined by 3.5% over the same time frame.
You can see the consensus estimate trend and recent price action for the stock in the chart below:
This negative trend indicates that analysts clearly have some apprehensions about the stock in the immediate future.
Bottom Line
Gray Television is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Notably, it also has a decent industry rank (Top 38% out of more than 250 industries). However, with a Zacks Rank #3 (Hold), it is hard to get too excited about this company overall.
In fact, over the past three years, the Zacks categorized Broadcasting – Radio/TV industry has clearly underperformed the broader market, as you can see below:
So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.
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Does Gray Television Offer a Good Value Buying Opportunity?
Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Gray Television, Inc. (GTN - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Gray Television has a trailing twelve months PE ratio of 13.42, as you can see in the chart below:
This level actually compares pretty favorably with the market at large as well, as the PE for the S&P 500 stands at about 20.43. If we focus on the PE trend, Gray Television’s current PE level puts it below its midpoint (which stands at 16.49) over the past three years and is also way below its high of 52.89 over the same time frame. This indicates that the stock is currently undervalued per its own historical trends.
Further, the stock’s PE also compares favorably with the Zacks classified Broadcasting – Radio/TV industry’s trailing twelve months PE ratio, which stands at 23.71. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Gray Television has a forward PE ratio (price relative to this year’s earnings) of 17.95, so it is fair to expect an increase in the company’s share price in the near future.
P/CF Ratio
An often overlooked ratio that can still be a great indicator of value is the price/cash flow metric. This ratio doesn’t take amortization and depreciation into account, so can give a more accurate picture of the financial health in a business. This is a preferred metric to some valuation investors because cash flows are (a) generally less prone to manipulation by the company’s management and (b) are less affected by variation in accounting policies between different companies.
The ratio is generally applied to find out whether a company’s stock is overpriced or underpriced with reference to its cash flows generation potential compared with its competitors. However, it is not commonly used for cross-industry comparison, as the average price to cash flow ratio varies from industry to industry.
In this case, Gray Television’s P/CF ratio of 7.10 is way lower than the Zacks classified Broadcasting – Radio/TV industry’s average of 32.25, which indicates that the stock is considerably undervalued at this point of time.
Broad Value Outlook
In aggregate, Gray Television currently has a Zacks Value Style Score of ‘A’, putting it into the top 20% of all stocks we cover from this look. This makes Gray Television a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, its P/S ratio (another great indicator of value) comes in at 1.23, which is comparatively better than the industry average of 1.55. Clearly, Gray Television is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Gray Television might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of ‘A’ and a Momentum score of ‘F’. This gives GTN a Zacks VGM score—or its overarching fundamental grade—of ‘B’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been quite bearish. The current quarter has seen two estimates go lower in the past sixty days compared to none higher. Similarly, the full year estimate has seen one downward and no upward revision in the same time period.
This has had a decidedly negative impact on the consensus estimate, as the current quarter consensus estimate has plunged 42.8% in the past two months, while the full year estimate has declined by 3.5% over the same time frame.
You can see the consensus estimate trend and recent price action for the stock in the chart below:
Gray Television, Inc. Price and Consensus
Gray Television, Inc. Price and Consensus | Gray Television, Inc. Quote
This negative trend indicates that analysts clearly have some apprehensions about the stock in the immediate future.
Bottom Line
Gray Television is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Notably, it also has a decent industry rank (Top 38% out of more than 250 industries). However, with a Zacks Rank #3 (Hold), it is hard to get too excited about this company overall.
In fact, over the past three years, the Zacks categorized Broadcasting – Radio/TV industry has clearly underperformed the broader market, as you can see below:
So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.
8 Stocks with Huge Profit Potential
Just released: Driverless Cars: Your Roadmap to Mega-Profits Today. In this latest Special Report, Zacks’ Aggressive Growth Strategist Brian Bolan explores a full-blown technological breakthrough in the making – autonomous cars. He also spotlights 8 stocks with tremendous gain potential to feed off this phenomenon. Click to see the stocks right now >>