SBGI
Sinclair, Inc.
$13.86
Leveraged Infrastructure
80%
EV/EBITDA × Cable Broadband Multiple
Moderate
·
Conviction
Overvalued
Trading 28.7% above fair value
You pay
$13.86
Bear
$0.00
Fair
$10.77
Bull
$26.40
Bear
$0.00
-100.0%
EBITDA $1B × 6.0x − $4B debt
Fair
$10.77
-22.3%
EBITDA $1B × 7.5x − $4B debt
Bull
$26.40
+90.5%
EBITDA $1B × 9.0x − $4B debt
Key Value Driver
EV/EBITDA multiple (7.5x) vs. 6.5× leverage
Implied Market Multiple
8.2x
Summary
Our base-case estimate uses EV/EBITDA × Cable Broadband Multiple. We then blend that result with the average analyst price target of $18.00 from 20 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $10.77 per share.
Warnings
Debt is 6.5x annual operating profit. Because the company carries so much debt, even small shifts in business value cause big swings in the stock price.
Operating profit only covers interest payments 1.4 times over. If the company needs to refinance at higher rates, it could struggle to service its debt.
Only 20% of operating profit turns into actual cash for shareholders. Big investments and interest payments consume most of what the business earns.
We value this business based on total operating profit relative to total enterprise value (debt + equity). Profit-per-share metrics are unreliable when debt makes up most of the company's value.
Wall Street's average price target is $18.00 (from 20 analysts). Our estimate is 54% below the consensus -- consider that gap carefully.
Key Risks
- Debt refinancing at higher rates compresses equity value quickly
- EBITDA flatters — capex, interest, and taxes eat the cash flow
- Cord-cutting and wireless substitution are structural headwinds for cable