The TSX has relatively limited choices when it comes to media and entertainment stocks. The entertainment industry, especially TV, is dominated by the media divisions of the Canadian telecom giants, leaving relatively little room for sizable media and entertainment publicly traded companies. But it’s possible to find at least a couple of good picks from the handful of options available.
A diverse media company
Montreal-based Stingray Group (TSX:RAY.A) is a diverse media company with a comprehensive range of services and a presence in multiple segments of the entertainment and media industry.
It caters to consumers and businesses with its consumer-oriented services, including audio, radio, and TV channels. The company also has TV channels and streaming services dedicated to concerts and Karaoke applications.
It offers a range of services to businesses, including in-store digital experiences, licensed music, and advertisement services. The diverse portfolio of services and presence in different market segments make the company resilient and provide it access to a range of growth opportunities.
Ever since its inception in 2015, the company has gone through multiple growth and slump cycles and is currently in the latter one. It has lost over 44% of its value from its 2021 peak and fallen from the pool of small-cap stocks into micro-caps.
This discount has resulted in two benefits – a good valuation and a juicy yield. The 6.6% yield may be reason enough to consider this stock, especially considering its steady dividend history and a solid payout ratio.
A cinema company
Cineplex (TSX:CGX) is the cinema giant of Canada that is still reeling from an acquisition deal that didn’t go through. The acquisition offer artificially propped up the price. The deal falling through together with COVID was too much for the stock together, and it’s currently trading at a 75% discount to its five-year high price point.
The stock hasn’t fully bounced back from the impact of the pandemic, which reduced the number of cinema-goers to a fraction of the pre-pandemic numbers. To make matters worse, the company was already dealing with the impact streaming companies had on cinema viewership numbers.
However, the company is turning things around. Its finances are improving at a compelling pace, and it has grown its revenues from double digits to over $400 million a quarter in less than three years.
With a price-to-earnings of just 2.99, it’s one of the most undervalued stocks on the TSX. Considering its valuation and financial recovery, it’s reasonable to assume that a strong stock recovery may happen in the near future.
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Foolish takeaway
The two entertainment and media stocks are worth looking into for different reasons. Stingray is a compelling dividend pick despite its low market valuation, while Cineplex could make a strong recovery if there is enough optimism in the market.
