Sinclair Inc (SBGI) is a Zacks Rank #1 (Buy) and it sports an A for Value and an A for Growth. Normally I select stocks that have strong revenue growth potential, but this one has a wonderful valuation and good growth potential. Let’s explore more about this company in this Bull of The Day article.

Description

Sinclair, Inc., a media company, focuses on providing content on local television stations and digital platforms. The company distributes its content through broadcast platforms and third-party platforms that consist of programming provided by third-party networks and syndicators, local news, other original programming, and college sports.

It also owns digital media products that are complementary to its portfolio of television station related digital properties, as well as interests in, owns, manages, and/or operates technical and software services companies, intellectual property for the advancement of broadcast technology, and other media and non-media related businesses and assets, including interests in real estate, venture capital, private equity, and direct investments. Sinclair, Inc. was founded in 1986 and is headquartered in Hunt Valley, Maryland.

Earnings History

When I look at a stock, the first thing I do is look to see if the company is beating the number. This tells me right away where the market’s expectations have been for the company and how management has communicated to the market. A stock that consistently beats has management communicating expectations to Wall Street that can be achieved. That is what you want to see.

For Sinclair, I see four consecutive beats Zacks Consensus Estimate. That is not that great to see, but by itself that is not enough to make the company a Zacks Rank #1 (Strong Buy).

I see a good earnings history with the company beating the number in each of the three quarters that had a Zacks Consensus Estimate. The last two quarters were massive beats.

Two quarters ago the company reported EPS of 90 cents when 28 was expected. That 62 cent beat translates to a 221% positive surprise.

Last quarter saw EPS of $2.71 when a loss of 59 cents was expected. The $3.30 difference works out to be a 559% positive earnings surprise.

Earnings Estimates Revisions

The Zacks Rank tells us which stocks are seeing earnings estimates move higher.

Over the last 60 days, earning estimates have increased for SBGI.

I see a big shift in estimates over the last 30 days. The estimate for this quarter improved from a loss of 63 cents to a loss of 58 cents.

Next quarter when from a loss of 14 cents to a loss of 10 cents.

The full year numbers are certainly more important… and they are dramatically different.

This year has moved from a loss of 16 cents 60 days ago to a gain of $1.43 30 days ago and is now at a gain of $2.71. That is a big time move higher.

Next year the dramatic move continues, with the estimates going from $3.56 to $4.23 and are now at $5.08.

EPS is basically expected to grow by 87% next year. That is huge.

Valuation

The huge growth in earnings and the stock moving lower have caused the valuation metrics to look very good. I see a forward PE of 5.7x which is super low compared to the 18.4x industry average. The price to sales comes in at 0.3x, again a very low compared to the 1.7x industry average.

The price to book on the Zacks website is 1.3x and is well below the 2.1x industry average. This where it gets interesting. The company noted in the most recent earnings report that they calculate their portfolio to have $1.3B in value and that equates to $19 a share.

Margins have moved dramatically higher over the last three quarters. I see them going from -0.56% to 2.8% and most recently at 8%.

Higher margins, combined with 15% topline growth projected for next year is driving the 87% growth in earnings.

— Brian Bolan

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Source: Zacks