CBS Outdoor is going public at an expected enterprise value of 3.6 times revenue or 11.5 times cashflow. Lamar is setting the industry standard with an enterprise value of 5.5 times revenue or 12.8 times cashflow. Clear Channel Outdoor is the industry laggard with an enterprise value of 2.66 times revenue or 10.9 times cashflow.
Why are CBS Outdoor and Clear Channel trading at such a discount to the 4-6 times gross revenue norm in the industry? (1) Both companies get 30% of their revenue from transit advertising. Transit contracts are only 3-5 years versus 20 year leases for billboards. Transit signs are smaller than billboard signs so servicing costs are higher. (2) 89% of Clear Channel Outdoor Stock is owned by Clear Channel Radio so investors are discounting the stock because they have little say in the company’s operation. See this skeptical article on Clear Channel Outdoor. (3) CBS gets a significant portion of revenues from international operations in countries where long term leases for outdoor signs do not exist.