Despite challenges like piracy and change in consumer preference, the entertainment industry is projected to sustain its growth.
While popular stock BuzzFeed, Inc. (BZFD) has gained significant investors’ attention, its profit margins seem lower than its industry peers.
Therefore, I think quality stocks, MultiChoice Group Limited (MCHOY) and Urban One, Inc. (UONEK), could be better picks now.
Shares of BZFD have gained 32.7% year-to-date but lost 82.3% over the past year, closing the last trading session at $0.92. Its trailing-12-month gross profit margin of 41.94% is 15.7% lower than the 49.77% industry average, and its trailing-12-month CAPEX/Sales of 1.24% are 66.9% lower than the 3.75% industry average.
Moreover, BZFD reported disappointing fourth-quarter results. BZFD’s revenue decreased 7.6% year-over-year to $134.62 million in the fourth quarter that ended December 31, 2022. Also, its adjusted EBITDA decreased 48.7% year-over-year to $17.56 million.
In addition, BZFD’s near-term prospects look bearish. The company’s revenue for the ongoing quarter ending March 2023 is expected to decline by 29.8% year-over-year to $64.27 million, and its EPS is expected to come in at negative $0.27.
BZFD has an overall D rating, equating to a Sell in our POWR Ratings system.
The digital publishing sector has been gaining traction over the past years. Digital publishing revenues in the U.S. are predicted to keep increasing and reach over $11 billion by 2025. Additionally, the average revenue per user for digital publishing in the U.S. is expected to rise across all platforms, suggesting a promising future for the industry.
Moreover, digitization, as well as the globalization of services, have further fostered a revolution in the US Media and Entertainment industry. The U.S. Media and Entertainment industry is expected to experience a CAGR of 8.9% through 2030.
Take a detailed look at the under $10 stocks mentioned above:
MultiChoice Group Limited (MCHOY)
Headquartered in Randburg, South Africa, MCHOY operates video-entertainment subscriber platforms in South Africa, rest of Africa, Europe, and internationally. It operates through South Africa; Rest of Africa; and Technology segments.
MCHOY’s forward EV/Sales of 1.04x is 44.8% lower than the industry average of 1.88x. Its forward EV/EBIT multiple of 5.37 is 66.4% lower than the industry average of 15.98. Its forward EV/EBITDA multiple of 4.33 is 48.3% lower than the industry average of 8.38.
MCHOY’s trailing-12-month EBITDA margin of 20.45% is 13.5% higher than the 18.02% industry average. Its trailing-12-month EBIT margin of 18.68% is 129.5% higher than the 8.14% industry average.
MCHOY pays $0.33 annually as dividends. This translates to a yield of 4.97% at the current price, compared to the 4-year average dividend yield of 2.97%.
MCHOY’s revenues increased 6.6% year-over-year to ZAR28.65 billion ($1.58 billion) during the half year which ended September 30, 2022. The company’s operating profit increased 6.2% year-over-year to ZAR6.22 billion ($341.88 million). Its total comprehensive income for the period rose 38.6% year-over-year to ZAR3.15 billion ($173.19 million).
Analysts expect MCHOY’s revenue for the current fiscal period ending March 2023 to be $3.23 billion.
The stock has gained marginally over the past five days to close the last trading session at $6.65.
MCHOY’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
MCHOY also has a B grade for Value and Stability. It is ranked #3 in the 8-stock Entertainment - Publishing industry.
To access additional ratings for MCHOY’s Growth, Quality, Sentiment, and Momentum, click here.
Urban One, Inc. (UONEK)
UONEK operates as an urban-oriented multi-media company in the United States. The company operates through four segments: Radio Broadcasting; Cable Television; Reach Media; and Digital.
On January 18, UONEK announced a partnership to conduct groundbreaking research which aims to improve podcast ad technology to ensure equal monetization opportunities for all creators of audio content.
The research will specifically address the industry’s generally limited brand safety technology capabilities for BIPOC audio content, with the goal of scaling new solutions that enable advertisers to sponsor BIPOC audio content at a higher rate and with greater confidence.
UONEKs trailing-12-month EV/EBITDA of 6.86x is 28.8% lower than the industry average of 9.63x. Its trailing-12-month Price/Sales multiple of 0.54 is 56.5% lower than the industry average of 1.24.
UONEK’s trailing-12-month EBITDA margin of 30.32% is 68.3% higher than the 18.02% industry average. Its trailing-12-month gross profit margin of 74.23% is 49.1% higher than the 49.77% industry average.
UONEK’s net revenue increased 8.9% year-over-year to $121.40 million in the fiscal third quarter, which ended September 30, 2023. Its broadcast and digital operating income increased 3.5% year-over-year to $50.84 million. Also, its adjusted EBITDA increased 3.8% year-over-year to $44.34 million.
The stock has gained 39.4% year-to-date to close the last trading session at $5.24.
UONEK’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
UONEK also has a B grade for Value, Stability, Sentiment, and Quality. It is ranked #2 in the same industry.
To access additional ratings for UONEK’s Growth and Momentum, click here.
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MCHOY shares were trading at $6.79 per share on Monday afternoon, up $0.14 (+2.11%). Year-to-date, MCHOY has declined -0.15%, versus a 4.09% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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