• by Wayne Friedman , October 19, 2010

Local TV station advertising revenue and overall profits may be skyrocketing upwards -- but station value is not rising for media investors.

Looking at the six pure-play TV station groups, New York-based media investment company M.C. Alcamo & Co. says companies are trading at less than they did at the start of the year -- even though revenues and profits are higher.

M.C. Alcamo says the six pure-play TV groups -- Belo Corp, Sinclair Television Group, Fisher Communications Group, Nexstar Broadcasting, Entravision Communications, Gray Television, and LIN Television -- are trading at an average of 9.6 times EBIDTA (earnings before interest, depreciation, taxes, and amortization) as of Sept. 30, versus 10.7 times EBIDTA in Dec. 31, 2009.

All of this has Michael Alcamo, president of the company, saying these TV stocks are probably undervalued by around 10%.

Moreover, those integrated media companies -- ones with non-TV and TV assets -- have seen their value drop as well. Those companies' stocks -- Gannett Company, Journal Communications, McGraw-Hill, Meredith Corp., Media General, Saga Communications, E.W. Scripps, and Washington Post -- are now pulling in a cheap 5.9 times EBIDTA versus 8.0 times at the start of the year.

At the same time, these 15 media companies -- pure-play and integrated media companies -- have seen 12.1% more revenue in the second quarter of 2010 versus a comparable period in 2009. In addition, profitability among this media group has improved 5 percentage points to 39% from 35% a year ago.

Alcamo finds all of this confusing: "Given the strong revenue recovery, and the improving cost situation at all the major broadcasters, and the high beta for broadcasters [beta is a trading metric that measures a stock's correlation to the broad market], it seems incongruous that share prices should lag so far behind the broader index."