Used (adjusted) Q3 2009 as "baseline." Management said EBITDA will increase at 3x revenue incrs. Assumed anywhere from 7%-13% revenue growth rate in 2010. Used 38% tax rate. Assumed $36 M in interest expense in 2010. (Too low??)
Unknowns: Might need to allow additional "fudge factor" for additional cost savings/efficiencies they will be squeezing out over next few quarters. My SUSPICION is that the actual EPS number for 2010 will be between 85 and 95 cents.
That puts the stock at about 2.5x earnings right now, which is pretty absurd considering, by my calculations, free cash flow would theoretically allow CMLS to pay off ALL of its debt in probably no more than 8-10 years.
I can see a 5-6 multiple put on this year's estimate, before the end of this year, and the stock selling at $5. I can see the company earning $1.15-1.25 in 2011, and the stock selling at 8x earnings. That gives an 18-24 month target here of about $10. AND, if radio comes into fashion, as it has before, I can see the thing selling at as high as $12-13, in a couple years.
The fact that they said they expect to show improvement in their Q4 2009 comparison vs. Q4 2008 comparison, relative to the decline they showed in Q3 2009 vs. Q3 2008, is pretty REASSURING to me, considering there was $3.6 million in political in Q4 2008....making the comparison notably difficult (since Q4 2009 is "dead" is far as political goes)....and especially reassuring, considering Q3 '08 only had $1.2 M in political, which made Q3 '09 a somewhat easier comparison.
Once we are past Q4 '09, it's off to the races, especially with a much improved political season in 2010 (not to mention the improving economy). I'm guessing they come in with revenues up 10%+ in 2010.
The good news is that Q4 earnings exceeded what I thought they would be. Nice cost controls!
The bad news is that management seems surprisingly conservative on its revenue estimates, especially for Q1. (Strange, with ETM having pacings up 7% in the 1st 2 months of 2010.)
If I, therefore, go with the low end of my estimates, and assume a 7% increase in total revenue for 2010 (which might seem prudent), that means CMLS earns 75 cents in fully taxed EPS this year.
I still think there's a chance they're being considerably too conservative, though. Ergo, I still feel pretty comfortable setting a range of 75-90 cents for this year (shaving a nickel off the high end of my previous range)...at the very least, assuming we will see SOLID DOUBLE DIGIT year over year revenue increases, in the back half of this year (especially owing to political).
In short, the stock is undervalued, at 4x this year's earnings....when ETM is selling at about 10x....and SALM is selling for like 15-20x!