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Entravision Communications Corporation Message Board

  • truth.monger truth.monger Mar 21, 2010 5:50 PM Flag

    Flawed "articles" are intended to generate clicks not profits

    A little over a year ago Motley Fool and others repeatedly listed Dollar Thrifty (DTG) as on "deathwatch" for imminent bankruptcy with similar claims & methodology. At the time DTG was trading at well under $1. Today DTG trades in the $30's. Of course more sophisticated investors know these "service providers" are simply trying to shock us into clicking on their links to sign up for services or to view their advertising.

    Their analysis is always superficial and focuses on one ratio with no context. For example, financial statement "equity" is a poor measure of an organization's value. This is especially true in the media industry today after EVC and others have been forced to write off intangible assets in accordance with universally applied accounting rules due to a significant but temporary reduction in revenue during the economic crisis.

    In media the financial statement value of assets is meaningless. It always has been. At times assets were over-valued now they are under-valued. Regardless of financial statement asset valuation, what we care about is the amount of cash those assets generate and the growth in that cash flow over the next decade. This is where EVC excels with its young growth demographic, strong ratings, growing retransmission revenue and long term exclusive content contracts. As S&P analysts mention, EVC has significant upside in a recovery thanks to the recovery of its hard hit Hispanic demographic.

    These reactionary fits of selling represent strong buying opportunities as the media environment continues to improve and EVC eventually grows beyond its pre-crisis valuation of $11/share.

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