When businesses get hit hard by tough economies, they start tightening their belts and cutting down on spending. One of the things they tend to cut back on is advertising, particularly pricey promotion vehicles such as billboards and other outdoor signs. A new report by marketing research firm IBISWorld brings a bit of welcome news, though: As the economy improves, businesses are advertising more, which is good for the billboard and sign industry.

Indeed, things appear to be looking up for the industry. The leader in the billboard and signage arena is Daktronics (Nasdaq: DAKT), which earlier this year sold 10 digital billboards to Las Vegas Billboards, installing them all around that glittery city. Lamar Advertising (Nasdaq: LAMR), another big player, noted in its Q4 earnings call that advertising in all sectors was up from approximately 8% to 13%, something that seems to be reflected in the company's rising stock value over the past three months. Clear Channel's (NYSE: CCO) Q4 report noted a 7% revenue increase from 2010 and has recently installed a digital billboard in New York's Times Square that centers on highlighting the businesses in the area.

The industry report notes that advertising budgets will not balloon overnight and forecasts overall growth for 2012 to be in the area of 5.3%, building slowly from there. One area of particular growth is digital billboards, which are popular with advertisers because they're so eye-catching. This election year, Clear Channel is using its expertise in this area to try to entice politicians to use digital billboard advertising to get their political ideas across to voters.

Fool's take
The recession that began in 2008 squeezed the billboard industry so severely that by 2009, many smaller companies had disappeared. The larger, stronger players survived and are just now starting to get back on their feet. Even so, they are not all rebounding at the same rate.

Of the three, Daktronics controls most of the market share. It also seems the busiest and is currently working on a big contract in Arizona, in addition to the recent job in Nevada. Its stock price is trading fairly low and has been for some time. The company did pay a dividend in December, however, even lumping an additional $0.40 on top of the regular payout, which is now twice rather than once per year. Lamar, on the other hand, has been seeing some investor confidence lately, trading close to its 52-week high. Both of these companies seem to be displaying renewed signs of life.

There are too many issues with Clear Channel to consider it a good bet, not the least of which is its lousy stock performance. Investors are suing the company for fiduciary breach, and its finances are a mess. It also has an enormous debt load, much of which is coming due in 2014 and 2016, so this company looks like one to watch from a distance to see how things unfold -- without putting your own finances at risk.

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