Over the past six months, Nexstar Media’s shares (currently trading at $152.86) have posted a disappointing 13.9% loss, well below the S&P 500’s 7.7% gain. This was partly due to its softer quarterly results and might have investors contemplating their next move.

Is there a buying opportunity in Nexstar Media, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.

Even though the stock has become cheaper, we're sitting this one out for now. Here are three reasons why there are better opportunities than NXST and a stock we'd rather own.

Why Is Nexstar Media Not Exciting?

Founded in 1996, Nexstar (NASDAQ:NXST) is an American media company operating numerous local television stations and digital media outlets across the country.

1. Long-Term Revenue Growth Disappoints

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, Nexstar Media grew its sales at a 13.8% compounded annual growth rate. Although this growth is acceptable on an absolute basis, it fell short of our benchmark for the consumer discretionary sector.

2. Projected Revenue Growth Is Slim

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect Nexstar Media’s revenue to rise by 3.1%, close to its 2.5% annualized growth for the past two years. This projection doesn't excite us and implies its newer products and services will not lead to better top-line performance yet.

3. Previous Growth Initiatives Haven’t Paid Off Yet

Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Nexstar Media historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 9.5%, somewhat low compared to the best consumer discretionary companies that consistently pump out 25%+.

Final Judgment

Nexstar Media isn’t a terrible business, but it doesn’t pass our bar. After the recent drawdown, the stock trades at 7.7× forward price-to-earnings (or $152.86 per share). While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're pretty confident there are more exciting stocks to buy at the moment. Let us point you toward The Trade Desk, the nucleus of digital advertising.

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