Last quarter Lamar Advertising Co (NASDAQ:LAMR)’s revenues rose 6% compared to the first quarter of 2012, though operating income showed very little change as SGA expenses picked up considerably. Net losses were a little over $6 million, with Q1 generally being poor for Lamar. Trailing earnings are currently very low compared to the company’s market capitalization, and even with Wall Street analysts expecting a large increase in earnings per share over the next year and a half the forward P/E is 45.
Lamar Advertising Co (NASDAQ:LAMR)’s closest peer is Clear Channel Outdoor Holdings, Inc. (NYSE:CCO), which manages billboards, street furniture displays, and transit advertising displays. This company is actually unprofitable on a trailing basis, with the sell-side expecting net losses this year as well. With revenue flat in the first quarter of 2013 versus a year earlier, we would avoid the stock.
We can also compare Lamar Advertising Co (NASDAQ:LAMR) to CBS Corporation (NYSE:CBS), which has an outdoor advertising business unit, as well as to other marketing companies including direct mailer Valassis Communications, Inc. (NYSE:VCI) and National CineMedia, Inc. (NASDAQ:NCMI). Valassis Communications, Inc. (NYSE:VCI) appears to be in value territory, trading at only 9 times its trailing earnings, though the company has experienced a decline in both revenue and net income. Analysts expect the company to recover, and in fact the five-year PEG ratio is well below 1, but we think that we’d have to see better results first. National CineMedia, Inc. (NASDAQ:NCMI) stands out for paying a dividend yield of over 5%, though with low earnings the company’s valuation multiples look quite high and- particularly with only modest revenue growth at the company- we’d worry that dividends are too high relative to earnings to be sustainable. As for CBS Corporation (NYSE:CBS), the media and entertainment company carries a trailing P/E of 19, reflecting the strength of its industry (its own earnings were up 22% in its most recent quarter compared to the same period in the previous year) and the potential for its own advertising business to spin out as an REIT.
Following Cohen into Lamar Advertising Co (NASDAQ:LAMR) looks quite risky to us. If anything, the company’s fundamentals as it is currently organized suggest a potential short target rather than a long- the earnings multiple is high, yet operating income appears flat. Buying the stock would be speculating on the company receiving REIT status (and achieving very high value creation from that event) and particularly given recent developments that’s not enough of a reason to buy.
Disclosure: I own no shares of any stocks mentioned in this article.