The ITV (LSE: ITV) share price rose about 85% in the past year. I had reviewed the stock a few months ago. It once again caught my attention when I watched the England vs. Denmark football semi-final match.
Here, I analyse the stock to understand whether I should be adding the stock to my portfolio.
ITV’s company fundamentals
ITV’s revenue in the first quarter grew 2% to £856m. It has made a good start to the year. Especially taking into consideration that the Covid-19 restrictions were in place for the entire quarter. I believe that the positive results in the last couple of quarters are one of the reasons for the strong rise in the ITV share price.
In the words of Carolyn McCall, the company’s chief executive, “Our advertising revenues are rebounding from last year with April up 68% and we expect May to be up around 85% and June up between 85% and 90%, compared to the same period in 2020.”
Looking into the key performance indicators, ITV’s total viewing hours increased 1% to 4.52bn, which is positive. At the same time, the ITV family share of viewing showed a slight drop from 23.6% to 23.1%. ITV Hub, an online video-on-demand service, has also increased its registered users by 5% to 33.6m.
The company has good liquidity of £1.4bn at the end of March 2021. Net debt was £558m, slightly higher than £545m at the end of December 2020. The cash flows have been good. Adjusted free cash flow was £605m for the full year 2020, up from £359m in 2019.
Euro 2020 advertising boon?
A record 26.3m people watched the semi-final match, for which ITV had the sole rights. Viewership peaked at 27.6m when the Hub and non-TV devices are taken into consideration. It was the largest football audience ever for a single channel. ITV will share the broadcast with BBC for the final match. So the semi-final match had the highest advertising rate, which as per reports, suggests £500,000 to £750,000 for a 30-second advert. In my opinion, this is positive since the company missed advertising revenues last year, due to Covid-19.
ITV share price – risks to consider
The number of Covid-19 cases is increasing all over the world. Global growth will slow down if this trend continues. In my opinion, this might have an impact on the company’s advertising revenues. Also, production delays are another risk due to the pandemic.
ITV shares are currently trading at a price-to-earnings ratio of 17.06 compared to a five-year average of 13.68. Its price-to-sales ratio is 1.75 compared to its historical average of 1.82. In my opinion, the upside might not be much as the ITV share price is trading close to its historical average.
The company is fundamentally strong. I will continue to keep the stock on my watchlist. I am not a buyer today because I believe that the shares are not a value buy at current prices.
Royston Roche has no position in any of the shares mentioned. The Motley Fool UK has recommended ITV. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.