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At US$10.68, Is It Time To Put Gray Television, Inc. (NYSE:GTN) On Your Watch List?

Gray Television, Inc. (NYSE:GTN), might not be a large cap stock, but it saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s examine Gray Television’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Gray Television

Is Gray Television Still Cheap?

Great news for investors – Gray Television is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 3.96x is currently well-below the industry average of 12.02x, meaning that it is trading at a cheaper price relative to its peers. However, given that Gray Television’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of Gray Television look like?

earnings-and-revenue-growth
earnings-and-revenue-growth

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a negative profit growth of -2.9% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Gray Television. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Although GTN is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. I recommend you think about whether you want to increase your portfolio exposure to GTN, or whether diversifying into another stock may be a better move for your total risk and return.

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Are you a potential investor? If you’ve been keeping an eye on GTN for a while, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

So while earnings quality is important, it's equally important to consider the risks facing Gray Television at this point in time. For example, Gray Television has 3 warning signs (and 1 which is a bit concerning) we think you should know about.

If you are no longer interested in Gray Television, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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