CCME - I've got cautious already back in the days before the warrants redemption because of the almost unanimous enthusiastic support this stock received with retail investors on this board, most other message boards, blogs and so on. Everyone seemed to own a good chunk already and that usually doesn't bode well for the share price. I also couldn't find anything that made this particular stock so outstanding.
Then I looked into EPS growth. The numbers look good when compared to 2008/09 but forward net income guidance of $71-75 million doesn't look like much EPS growth when you take all the additional shares in the equation.
Then those (in my opinion) invalid comparisons with Focus Media and their much higher multiples. FCMN is just doing a very different kind of advertising, to compare them with CCME seems far-fetched to me. Closest peer might be VISN and look what their share price did this year.
Then the trading patterns with the stock being range-bound ever since it changed ticker symbol. It was not participating in any China rally back in the days when there was no bubble/fraud/auditor talk in the CGS sector. There always seemed to be massive sellers in the market.
And my biggest reason - and this is where I probably have to disagree with most of you. I have an issue with the business model. I do not believe that streaming video advertising on buses would work in Europe or the U.S. - people would not accept it and advertisers don't want to be seen merely as an annoyance. Sure, China might be a few years behind in ad penetration and habits might be a bit different there. However, there seems to be a strong affinity with Western lifestyle, especially in the cities, and I believe the Chinese consumer will not behave very different from anyone in the U.S. or Europe in the near future.
"The Company is engaged in selling out-of home television advertising time slots on its network of flat-panel television advertising displays located in high traffic areas, such as commercial locations and in-store network. It is also engaged in providing advertising services on in-elevator poster frames, mobile handsets, the Internet, on screens in movie theatre, and on traditional outdoor billboards."
All of those platforms would work here as well. But that is not CCME, it is FCMN. There is no guarantee that even with a growing number of public transport users the bus-idea will show the projected growth, similar to how there is no more growth here with print media or radio advertising, quite the opposite.
Those are some reasons why I have been cautious, that doesn't mean that in a reasonable market a company like CCME should not deserve multiples of 10 or 12 on trailing earnings.
