Nexstar Media Group: A Broadcast Beacon in an Undervalued Sector

The broadcast television industry, often perceived as a relic of the analog age, is quietly positioning itself as a value-driven asset class. At the forefront stands Nexstar Media Group (NXST), the nation's largest owner of local TV stations, which boasts a robust earnings profile and strategic advantages in a sector trading at deep discounts to historical norms. With a P/E ratio of 8.61—well below the industry median of 15.9—Nexstar presents a compelling entry point for investors seeking stability and growth in a media landscape undergoing structural shifts.

Valuation: A Discounted Opportunity

Nexstar's current valuation multiples underscore its undervaluation relative to peers. Its enterprise value-to-revenue (EV/Revenue) ratio of 2.2x and EV/EBITDA of 6.4x (both trailing 12 months) place it at the lower end of its peer group. Competitors like Sinclair Broadcast (SBGI) trade at an even cheaper 6.57 P/E, but Nexstar's scale—operating over 200 stations with affiliations to all major networks—gives it a broader revenue base. Meanwhile, Disney's (DIS) P/E of 24.3 reflects its premium growth profile, but Nexstar's steady cash flows and low debt-to-equity ratio (1.2x) offer a safer, dividend-friendly alternative.

The stock's 8.61 P/E is a 44% discount to its 5-year average of 15.43, suggesting the market has overlooked its fundamentals. Even with a recent revenue dip (-3.9% YoY in Q2 2025), Nexstar's $3.31 EPS beat estimates by 10%, indicating earnings resilience. This divergence between weak revenue and strong profits hints at cost discipline, a theme critical to its undervaluation thesis.

Strategic Advantages: Scale and Diversification

Nexstar's dominance in local broadcasting is its crown jewel. Its stations reach 90% of U.S. TV households, and its NewsNation network—a 24-hour news outlet—has grown its audience by 20% since 2020. This scale not only provides stable ad revenue but also grants negotiating power with cable distributors and digital platforms. Additionally, Nexstar's 34% EBITDA margin (LTM) reflects operational efficiency, a rarity in an industry where peers like E.W. Scripps (SSP) struggle with margins below 10%.

The company's diversified revenue streams are another strength. While traditional TV ad revenue faces headwinds, Nexstar's digital advertising (25% of total revenue) and streaming partnerships—such as its stake in The CW Seed—offer growth vectors. Its 2019 merger with Tribune Media also expanded its network affiliate portfolio, securing lucrative retransmission consent fees from cable providers.

Regulatory Tailwinds: A Favorable Environment

Recent FCC actions suggest a regulatory climate supportive of broadcast consolidation. In Q2 2025, the FCC approved a merger in the Greenwood-Greenville, MS market, citing the need to preserve local news. This decision aligns with Nexstar's strategy of acquiring stations in markets where competitors might exit. While no direct rule changes impacted Nexstar, the FCC's leniency toward local ownership reduces the risk of antitrust challenges for future acquisitions.

The push for ATSC 3.0, a next-gen broadcast standard, also presents an opportunity. Though Nexstar hasn't yet invested heavily in this technology, its scale could allow it to lead a transition that enhances over-the-air quality and attracts viewers from streaming platforms. The FCC's consideration of deadlines for ATSC 3.0 adoption (proposed by the NAB) could create a competitive moat for early adopters.

Risks and Considerations

Nexstar isn't without challenges. Its “Very Negative” estimate revisions grade (16/100) signals analyst skepticism about its ability to sustain growth, exacerbated by the Q2 revenue decline. Rising interest rates could also strain its $6.4 billion net debt, though its low leverage ratio (compared to peers) offers some cushion. Additionally, the broader broadcast sector's undervaluation may persist if cord-cutting accelerates, though Nexstar's digital diversification mitigates this risk.

Investment Thesis: Buy the Dip

Nexstar's valuation discounts its scale, cash flows, and strategic agility. At 8.6x EV/EBITDA, it's priced for stagnation, not growth. Investors should view dips below $150—a level it tested in early 2025—as buying opportunities. The stock's 3.2% dividend yield adds further appeal in a low-rate environment.

Catalysts to Watch:
1. Revenue Recovery: A rebound in ad sales (post-election cycle) or digital revenue growth.
2. M&A Activity: Announcements of station acquisitions in underserved markets.
3. Regulatory Clarity: FCC decisions on ATSC 3.0 deadlines or spectrum auctions.

Historically, such a strategy has carried significant risks. From 2020 to 2025, buying NXST on earnings beats and holding for 20 days resulted in an average return of -3.75%, with volatility of 31.79% and a maximum drawdown of -51.86%. The negative Sharpe ratio (-0.03) underscores poor risk-adjusted performance, suggesting short-term trades around earnings announcements may not align with the stock's long-term fundamentals. Investors should prioritize valuation metrics and strategic catalysts over short-term volatility, focusing on Nexstar's undervalued multiples and cash flow stability.

Conclusion

Nexstar Media Group is a paradox of modern media: a legacy player thriving in a digital age, undervalued yet strategically positioned. Its discounted valuation, scale-driven earnings, and favorable regulatory environment make it a standout in a sector primed for revaluation. For investors seeking stability with upside, Nexstar offers a compelling entry point—one that could shine as broadcast's undervalued era finally turns.

Disclosure: The analysis is based on public data and does not constitute personalized investment advice. Always conduct your own research.