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Immediately (6 March) has seen a bounce in the ITV (LSE: ITV) share price, after the broadcaster unveiled its full-year numbers.
Over the long term, although, the Metropolis has been tuning out the FTSE 250 firm’s funding case. The ITV share price has fallen 27% over the previous 5 years.
The price chart doesn’t present the total image when it involves traders’ returns.
In any case, ITV has a juicy 6.7% dividend yield. The firm held the annual dividend per share flat in as we speak’s outcomes and stated it expects the identical payout for this yr, though it anticipates rising the dividend over the medium time period.
So, is this a share traders ought to contemplate not just for the engaging passive revenue potential, but in addition maybe some capital positive aspects as it begins to get again to its former price stage?
Lengthy-term query mark
To some extent, I feel the ITV share price chart incorporates some clues to the reply.
For years, ITV shares have seemed low cost. But they’ve usually didn’t rise above a sure stage earlier than falling once more.
Income final yr fell 3%. That factors to a number of the longer-term challenges for ITV. Demand for legacy terrestrial providers stays substantial however is in structural decline, posing an ongoing risk to promoting revenues.
In the meantime, digital providers may help present some development alternatives and certainly digital revenues final yr had been a considerable £556m. However the market is crowded.
ITV’s studios enterprise, which helps different broadcasters produce and shoot reveals, might assist. However demand has been weakening and final yr, income from ITV’s studios division fell 6%.
The query I feel traders have been wrestling with for years – and that continues to be unanswered – is whether or not this is a money generative legacy enterprise in genteel decline, or a cut price media firm that is efficiently pivoting to new areas of alternative.
(*5*)Plenty of potential
Though revenues declined, earnings per share doubled.
The firm advantages from a powerful model, giant viewer and subscriber base, distinctive studio services, and substantial money flows. Final yr, for instance, it generated £325m of free money stream. For a corporation with a market capitalisation of £2.8bn, that is substantial.
The truth is, I feel ITV has the potential to maintain doing nicely over the medium to long run.
It has tailored its enterprise mannequin for a shifting media panorama whereas persevering with to make earnings and generate free money stream, supporting a beneficiant dividend.
Regardless of all that, the ITV share price has continued to languish for probably the most half.
The funding case now is a lot as it has been for the previous a number of years or extra, so I see no instant motive for it to begin climbing again to its previous stage.
From a long-term perspective, although, I do see it as undervalued and so suppose traders ought to contemplate it.
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