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  5. CCA: Pls comment on the earnings and guidance. [Cogeco Communications Inc. Subordinate Voting Shares]
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Q: Pls comment on the earnings and guidance. Time to add ? Thank you.
Asked by Paul on January 12, 2024
5i Research Answer:

CCA is a legacy media company and is now trading at 8x times' Forward P/E. In the 1Q - 2024, CCA’s revenue declined by around -2% to $747M, slightly missing estimates of $753M and EPS was $2.0, beating estimates of $1.92. The balance sheet is leveraged with net debt of $4.7B and net debt/EBITDA of 3.3x. CCA is currently in an investment cycle. Capital expenditure has ramped up meaningfully in the last few years. The share price could have a decent upside as soon as the company completes the investment cycle and free cash flow returns. Overall, a very cheap stock with lots of cash flow, but there is not much growth in the overall sector, and revenue is not expected to move much. While it is priced right, it is hard to get excited here. We would be OK to HOLD but not to add.