Charlie Bottle

What Created Market Misunderstandings About Lamar Advertising?

OK, let cash be king (I do belive that your investment in billbords does depretiate over time, but ok). The compnay just raised debt at 12.5% cost. What would you say their WACC is? Beta is pretty high so their cost fo equity should be 15% at least. Let's say WACC is 11.5%. The free cashflow for the last quarter was about $70 million, let's assume that is sustainable moving forward (i.e. annual FCF of $280 million), and further assume that they can grow prices by 2% in line with inflation. The entreprise value would be $2.4 billion...the Company has about 3.0 billion of debt and preferred shares so the common shares are not worth the paper they are written on.



On Apr 03 04:14 PM billboard guy wrote:

> have you ever thought practically about the fact that billboards
> don't wear out? you can have a negative tangible book value on the
> balance sheet and still have a very valuable billboard company. in
> fact most of the private companies in the industry have had upside
> down balance sheets for ages. accounting and economic value do diverge
> when economic depreciation is different than accounting depreciation.

What Created Market Misunderstandings About Lamar Advertising?

I meant negative net tangible equity.

What Created Market Misunderstandings About Lamar Advertising?

Thank you for the article. Investors have hammered this stock and will continue to do so because the company has historically produced returns on equity of 2-3% on average, thefore it is a value distroying company. It has net tangible assets. The company is worth less that the debt on it. That is why investors are concerned not because of the methodology of calculation of the covenant.