Lamar Advertising Company (LAMR) is one of the largest outdoor advertising companies operating in the United States and Canada. It has the largest network of digital billboards in the United States, with more than 3,900 displays. The Baton Rouge, La.-based company has more than  351,000 displays across the United States and Canada combined.

LAMR earlier this month expanded its billboard structures and digital displays portfolio by acquiring Burkhart Advertising Inc. Through the acquisition, LAMR purchased more than 1,500 billboard structures and 3,200 billboard faces, including 23 digital displays, in 38 counties across northern Indiana.

LAMR’s shares have gained 2.3% in price over the past five days and marginally intraday to close yesterday’s trading session at $98.64.

Here is what could shape LAMR’s performance in the near term:

Impressive Growth Story

LAMR’s revenue and net income have increased at CAGRs of 4.3% and 9%, respectively, over the past three years. The company’s EBITDA rose at a 5.5% CAGR over this period, while its EPS has improved at an 8.3% rate  per annum over the past three years. Also, LAMR’s AFFO has grown at a 6.2% CAGR over the past three years and at a 5.7% CAGR over the past five years.

Furthermore, the company’s trailing-12-month revenues increased 22.1% year-over-year. Its trailing-12-month net income and EPS rose 83.2% and 82.5%, respectively, year-over-year. In addition, the company’s trailing-12-month levered free cash flow increased 6.3% from the same period last year, while its AFFO grew 29.2% year-over-year. Also, LAMR’s trailing-12-month ROE improved 76.6% year-over-year.

Bullish Growth Prospects

Analysts expect LAMR’s revenues to increase 10.1% year-over-year to $490 million in its fiscal second quarter, ending June 30, 2022. The $1.28 consensus EPS estimate for the current quarter indicates an 8.6% rise from the same period last year. Furthermore, the Street expects LAMR’s revenue and EPS to increase 8% and 32.4%, respectively, year-over-year to $515 million and $1.39 in its fiscal 2022 third quarter (ending Sept. 30, 2022).

In addition, LAMR’s annual revenue is expected to increase 10.8% in fiscal 2022 and 4.5% next year. Analysts expect the company’s yearly EPS to improve 27.9% year-over-year in the current year and 6.4% year-over-year next year.

Discounted Valuation

In terms of non-GAAP trailing-12-month P/E, LAMR is currently trading at 24.66x, which is 27.2% lower than the 33.88x industry average. Its 17.12 trailing-12-month EV/EBITDA multiple is 17.6% lower than the 20.78 industry average. Furthermore, the stock’s 13.78 forward Price/AFFO multiple is 20.4% lower than the 17.30  industry average.

In addition, the stock’s trailing-12-month Price/Sales and Price/Cash Flow ratios of 5.33 and 13.29, respectively, compare with 6.06 and 15.69 industry averages. LAMR is currently trading 5.36 times its trailing-12-month rental revenue, which is 30.9% lower than the7.75  industry average.

Consensus Rating and Price Target Indicate Potential Upside

Of the two Wall Street analysts that rated LAMR, one rated it Buy while one rated it Hold. The 12-month median price target of $133 indicates a 34.8% potential upside from yesterday’s closing price of $98.64. The price targets range from a low of $131.00 to a high of $135.00.

POWR Ratings Reflect Rosy Prospects

LAMR has an overall A rating, which equates to Strong Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

LAMR has a B grade for Quality and Sentiment. The company’s trailing-12-month net income margin and ROE of 23.61% and 36.71%, respectively, are significantly higher than the 18.65% and 4.96% industry averages, which are in sync with the Quality grade. Also, LAMR’s revenue and earnings growth prospects justify the Sentiment grade.

Among the 50 stocks in the B-rated REITs – Diversified industry, LAMR is ranked #1.

Beyond what I have stated above, view LAMR ratings for Stability, Momentum, Growth, and Value here.

Bottom Line

LAMR has benefited from the increasing shift toward digital advertising in recent years. And its recent acquisition of Burkhart Advertising has significantly expanded its digital billboards portfolio. As digital advertising becomes the norm, analysts expect LAMR’s revenue and EPS to increase substantially in the near term. Thus, given its discounted valuation compared to its peers, we think LAMR is an ideal investment bet now.

How Does Lamar Advertising Company (LAMR) Stack Up Against Its Peers?

LAMR has an overall POWR Rating of A, which equates to a Strong Buy rating. This rating is superior to its peers within the REITs – Diversified Industry, such as One Liberty Properties, Inc. (OLP), Weyerhaeuser Co. (WY), and PotlatchDeltic Corporation (PCH), which all are rated B (Buy).

LAMR shares were trading at $99.25 per share on Tuesday morning, up $0.61 (+0.62%). Year-to-date, LAMR has declined -17.37%, versus a -14.70% rise in the benchmark S&P 500 index during the same period.

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities.

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