The Motley Fool

Should You Buy Corus Entertainment Inc. (TSX:CJR.B) Ahead of Earnings?

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Corus Entertainment Inc. (TSX:CJR.B) is set to release its earnings tomorrow, and it’ll likely have a big impact on how the stock does for the next few months. Corus has struggled over the past few years, losing 75% of its value in the last five years and half of its value in the last three. The stock has shown signs of life so far in 2019, but it’s going to need a big quarter to get investors excited about for that trajectory to continue.

The good news is that the company did see an improvement in its last quarter as Corus was able to drive some growth, unlike a horrible Q1 back in 2018 that sent the stock reeling. Corus’ stock is trading well below its book value and I still see a lot of upside for this stock.

While growth may be hard to come by for the company, if Corus is able simply to show a modest increase and possible squeak out more from its bottom line, that could be enough to at least have the stock trading at around its book value.

Investors aren’t expecting high growth numbers from the stock; they’re just looking for some signs of life from the cable-dependent industry. Proof that advertisers haven’t been moving away toward online streaming is a sensitive area for investors, which is why even a nominal amount of growth could ensure that the stock doesn’t go over a cliff.

How has the stock performed in the past?

In the previous two earnings releases, Corus has been able to generate a little bit of bullishness in its share price but it hasn’t been a whole lot of excitement from investors. In the four prior results, however, we’ve seen some steep declines, and we’ve seen drops of more than 16% twice.

Given how bearish investors have been with Corus stock over the past few years, I wouldn’t rule out the possibility of another big sell-off happening if the company doesn’t have a good quarter. Although there’s definitely a reduced chance of that happening simply because the stock is already so low, it’s still a risk investors need to be aware of.

The stock has hit low as $3.62 over the past 52 weeks, and so it wouldn’t be unchartered territory if the stock sees a big drop in price.

Bottom line

I still see a lot of value in Corus, as it has a great portfolio of assets and content that suggests to me there are still growth options there for the company, especially if it looks to place more of its content online, as opposed to relying on cable. As Corus is a content provider and not an actual cable company, its risk to cord cutting is limited, and it can still turn its struggling sales numbers around.

Ultimately, I plan to hold onto my position in Corus unless there is something absolutely disastrous in the company’s earnings as I still see a path for the stock to return back to double digits.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor David Jagielski owns shares of CORUS ENTERTAINMENT INC., CL.B, NV.

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