Is Now the Time to Buy ITV?

LONDON -- I'm always searching for shares that can help ordinary investors like you make money from the stock market.

So right now I am trawling through the FTSE 100 and giving my verdict on every member of the blue-chip index. Simply put, I'm hoping to pinpoint the very best buying opportunities in today's uncertain market.

Today I am looking at ITV (LSE: ITV  ) to determine whether you should consider buying the shares at 108 pence.

I am assessing each company on several ratios:

Price/Earnings: Does the share look good value when compared against its competitors?

Price/Earnings to Growth: Does the share look good value factoring in predicted growth?

Yield: Does the share provide a solid income for investors?

Dividend Cover: Is the dividend sustainable?

So let's look at the numbers:

Price

3-Year EPS Growth

Projected P/E

PEG

Yield

3-Year Dividend Growth

Dividend Cover

108 pence

339%

12.3

1.4

1.9%

N/A

4.9

The consensus analyst estimate for this year's earnings per share is 8.6 pence (9% growth) and dividend per share is 2.4 pence (50% growth). N/A = not applicable; ITV only reinstated its dividend in 2011.

Trading on a projected P/E of 12.3, ITV appears cheaper than its peers in the media sector, which are currently trading on an average P/E of around 17. ITV's relatively low P/E and high single-digit growth rate give a PEG ratio of around 1.4, which implies the share price is slightly expensive for the near-term earnings growth the company is expected to produce.

Offering a 1.9% yield, the dividend is around half of the media sector average. Unfortunately, ITV did not pay a dividend in 2009 and 2010, and therefore it is impossible for me to calculate a three-year dividend growth rate. However, the company is forecast to increase its full-year dividend this year by 50%.

The dividend is just under five times covered, giving ITV plenty room for additional payout growth.

Explosive historic growth, but the dividend has been lagging
First, I see ITV made a pre-tax loss in 2008 and only produced a marginal profit in 2009, and these poor years have skewed ITV's historic growth rates. However, I believe ITV is making solid progress in recovering from those tough times.

Indeed, in November, the company reported revenue up 4% for the first half of the financial year, as well as a strong net cash position of £90 million -- a significant improvement on the 750 million pound debt pile the company had in 2008.

In addition to improving revenue, ITV is undertaking a cost-saving plan and so far I can see the group is making solid progress. ITV's management expects cost savings in 2012 to be around 30 million pounds -- almost 10 million pounds ahead of target.

That said, ITV does have a skeleton in the closet, which comes in the form of a pension deficit amounting to just over 400 million pounds. However, taking into account the fact that ITV's studio division is expected to produce a profit of 100 million pounds this year and the company's current net cash position, I believe this deficit is not going to be a significant long-term issue for ITV.

So overall, I believe now looks to be a good time to buy ITV at 108 pence.

More FTSE opportunities
As well as ITV, I am also positive on the FTSE shares highlighted in "8 Dividend Plays Held By Britain's Super Investor." This exclusive report reveals the favorite income stocks owned by Neil Woodford -- the City legend whose portfolios have thrashed the FTSE All-Share by 200% during the 15 years to October 2012.

The report, which explains the full investing logic behind Woodford's dividend strategy and his preferred blue chips, is free to all private investors. Just click here for your copy. But do hurry, as the report is available for a limited time only.

In the meantime, please stay tuned for my next verdict on a FTSE 100 share.

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