Login
Site Policies

Top Buy Picks

MagicDiligence	-4.14%
S&P 500 ETF	-3.62%
Underperform	-0.52%

Take a FREE Trial!

Updated daily. All values annualized from Jan. 2008.

Westwood One operates two businesses, both terrestrial radio based. The traffic division provides customized news and traffic reports, and earns revenues on the short, announcer-read ad spots embedded during these reports. The network division provides longer events such as sports which are then sent to member stations around the country.

This company, and stock, fully deserves it's penny stock price. Revenues have been falling for the last 4 years, at nearly double digit rates. The ad businesses is brutally competitive, and Westwood faces stiff competition not only from other terrestrial radio operators like Clear Channel, but also from new media such as satellite radio and the internet. Terrestrial radio's decline as an entertainment medium has also sent ad prices falling.

Add to these problems one of a big debt load. At 330 million, this is almost 3 times the company's market cap! Coverage ratio is barely 3x earnings. There is very little wiggle room if revenues continue to decline, which is unfortunately the most likely scenario.

Magic Formula investors would be well advised to stay far away from Westwood One in their portfolio.

Steve owns no position in any stocks discussed in this article.

Calculate Magic Formula statistics for any stock with the MFI Stats Calculator tool.

Earn money promoting MagicDiligence! Affiliate program is now available!.

Lower your risk and increase your returns. A MagicDiligence Membership provides you with in-depth research on the very best stocks in the Magic Formula screen today. Avoid the value traps and get in on the truly great companies. Completely free 30-day trial!