Many Advertisers Demanded Their Commercials Be Taken From The Broadcast.

With increasing car sales, more cars will roll from the line with factory-installed Sirius XM radios this year than ever before. Searching for new investment ideas, I am going to look at Cumulus Media (CMLS), Corus Entertainment (CJREF.PK), and Sirius XM Radio (SIRI).

Cumulus Media operates nearly 400 AM and FM radio stations in markets like San Francisco, Dallas, Houston and Atlanta. The organization does not pay a dividend, however its surging gains in revenue and earnings match growth to offer a tempting investment.

The organization found itself at the center of a controversy when radio commentator Rush Limbaugh, a regular on some Cumulus stations, made offensive on-air comments about a female college student during his show. Many advertisers demanded their commercials be taken out of the broadcast. While the uproar continues to be problematic, it could prove good for Cumulus, as it prepares to debut a new show from ex-Arkansas Governor Mike Huckabee.

Powered through the acquisition and integration of rival Citadel, Cumulus saw its year-to-year earnings surge inside the 4th quarter of 2011, climbing over 510%. The organization appears to be poised for further gains in 2012, with analysts expecting earnings of $0.79 per share for the fiscal year.

While Cumulus Media enjoyed a great 2011, the company has some symptoms scattered throughout its financials. Its 4th quarter loss was the first the company experienced in a year. Cumulus’ debts are mounting, and its $2.9 billion shortfall dwarfs its total cash of $47 million. Investors seem to be growing weary, as noticed by the fact that they hold nearly 35% in the company’s stock float in a nutshell positions. Cumulus is not a portfolio-builder, but investors available to some risk could profit nicely when the company can continue its upward climb.

Corus Entertainment is an additional interesting play in the media sector. This $1.83 billion Canadian company owns around 40 television stations, and lists networks like Nickelodeon, CMT as well as the Oprah Winfrey Network among its assets. The inclusion of Winfrey’s network contains the potential to be especially appealing, giving Corus the opportunity to capitalize on the talk show host’s meteoric popularity as well as the development of her unique Oprah’s Lifeclass Tour, that is using a live tour and digital classrooms to arrive at a growing audience.

Corus is already building over a solid performance in 2011, where the company saw revenues and earnings rise (up 6.6% and 5.9%, respectively), while share prices increased nearly 3%. The organization also recently purchased its Corus Quay building Toronto Port Lands Company and re-sold it to H&R REIT so that you can renegotiate its lease agreement.

Unlike Cumulus, Corus is a more stable investment proposition. The organization has not experienced the dizzying development of Cumulus, but it has a low debt ratio (now at 57) and free earnings of nearly $523 million. The organization does not pay a dividend, however its projected growth of 9% this year is likely to attract a number of investors aiming to enter the business segment.

Any conversation of alternate media eventually creates a discussion of Sirius XM Radio. The dominant satellite radio provider, this $8.7 billion company is an interesting case study in short investing. Mounting up cash (an expected $1.5 billion this year) as it accumulates debt (now over $3 billion), the percentage of Sirius shares held via short positions has soared with an incredible 26.7%. A number of analysts have experimented with put a positive spin with this (calling it “short interest”); however, a lot more likely label should be risk. Many investors view Sirius being a speculative play. This is a reasonable conclusion, determined by both the company’s high debt and its flat projections for the year ahead.

The prospects of a significant share price increase at Sirius are terrible at this time. The company carries a forward price to earnings ratio of 23 and its price to book of 12.5 suggests an overvalued position. Their relationship with the auto companies are a bright spot. As car sales continue to increase, it is likely that more will roll from the showroom floor with factory-installed Sirius XM radios. Although company revenue did increase by 6.5% inside the 4th quarter, mounting debt could hamper any hint of a sustained rally.

As companies linked to broadcast media fight for market share and advertising dollars, individuals have to look carefully for the best investments inside the sector. Since performance here relies upon share price growth and not dividends, locating a company with stable increases and future expansion is a lot more likely to bring long-term success.

I like Cumulus and Sirius for a small portion of investors. People who have an appetite for risk may actually consider both companies, anticipating increases in share price that outweigh the inherent difficulty with debt. For these investors, both companies are interesting. However, Cumulus is apparently more appealing due to its higher upside.

For most people looking for a new holding, I recommend Corus Entertainment. The company has a lower threshold of debt, and its earnings have been steady. Should its relationship with Oprah generate interest, the low P/E of 12 and reasonable price to book ratio suggest the stock has room growing. There are still good investments in broadcast media, and investors should think about taking to the airwaves with Corus Entertainment, writes tagza.