• by David Goetzl  @dgoetzl, May 8, 2008

Frustrated that performance is not being rewarded by Wall Street, Sinclair Broadcast Group CEO David Smith said Wednesday that the company has considered going private.

Smith said that due to strong free cash flow, "anybody that's looking at the Sinclair stock today would have to say there's a tremendous amount of value." Yet, "for whatever reason, the valuations just don't show up from a market standpoint in our equity."

Even as the station group reported a 23% gain in first-quarter operating income Wednesday--despite a tough economy and many of its competitors struggling--the stock price rose 30 cents and has been trading in single digits.

"Certainly going private is a discussion that we've had," Smith said on a conference call to discuss the first-quarter results. He later added, however, that the troubled credit markets would make it difficult to obtain financing for such a move.

Also under consideration as a Wall Street buffer, but affected by the credit markets, would be a major share repurchase program, Smith said.

So for the time being, Smith said the company is focusing on paying dividends to investors.

Sinclair operates 58 stations in 35 markets, including 20 Fox affiliates in markets such as Baltimore, Pittsburgh and San Antonio.

Overall in the first quarter, station revenues were $160.9 million--up 8.5% compared to the same period a year ago. Operating income jumped 23% to $46.2 million.

Revenues grew, even if $3.2 million from political spending and $5 million from the Super Bowl on Fox were to be stripped out.

Local ad dollars--considered by many, including Sinclair, as the future of the station business--increased 4.9% (not including political dollars), while national spot came in with an increase of 3%.

The struggling automotive category--which accounts for 20% of ad revenues--was up 2.6%. But the company said with General Motors trimming spending, the category is expected to be down in the current second quarter. Offsetting some of the GM decline are increases among foreign makers such as Honda and BMW.

Sinclair has shown an aggressiveness in investing in non-media properties--from a public safety software company to a security alarm operation--and in the first quarter it invested $44.4 million there, notably $35 million for a 50% share in a Virginia resort.