Great films are often snubbed at the Oscars. Similarly, we feel investors aren't giving Entertainment One (ETO) the credit it deserves. The group, which licenses out distribution rights for films and television shows to more than 500 broadcasters worldwide, is supplementing strong TV sales with international acquisitions and higher-margin production. Meanwhile, its film division looks poised to benefit from a strong slate of cinema releases this year. Yet, despite the company's growth prospects, its shares trade at just 11 times forecast earnings for the year to March 2017.
- Global reach and vast content library
- Peppa Pig's prolific rise
- Strong sales and profit growth
- The shares are cheaply rated
- Investments weighing on cash flows
- Volatile box office revenue
Entertainment One's main growth engine is its TV business. The division's underlying sales leapt nearly a third last year, driving adjusted cash profit up 41 per cent to over £51m. It benefited from a 27 per cent rise in production and sales revenue, as shows such as Rookie Blue and Saving Hope attracted droves of viewers. But the real star was the TV division's smaller 'family' segment, which licenses out broadcasting and merchandising rights to branded properties. Sales soared 71 per cent and cash profit more than doubled, to about £24m, as pre-school brand Peppa Pig generated over $1bn (£640m) in retail sales worldwide and secured more than 600 licensing deals. The animated piglet has also won space on the shelves of US retail giants Walmart and Target, and management is rolling out the character in Brazil, China and elsewhere.