Sometimes investors get so excited about one industry that they completely ignore others, which can lead to valuations getting too low for good businesses. A case in point is Wall Street's love affair with digital media, which has left traditional media stocks in the bargain bin.

AMC Networks (NASDAQ:AMCX) has a long track record of producing hit TV shows, which has created one of the top brands in media. Tegna (NYSE:TGNA) and Gray Television (NYSE:GTN) operate local TV stations in top markets around the country, which allows both companies to rake in loads of ad dollars during even-year elections, in addition to sports events like the Olympics. 

All three companies are very profitable and are investing for the future, and you can buy these stocks for a song. If your brokerage account is heavy on high-P/E growth stocks, adding a few of these media stocks might be a good way to create some balance.

A stash of one hundred-dollar bills.

Image source: Getty Images.

1. AMC Networks: Life after The Walking Dead

AMC Networks has produced several hit TV shows over the last decade, including Breaking Bad, Better Call Saul, and Mad MenThe Walking Dead is one of the most successful series in its history, but investors have gotten cautious about the stock as the show has aged and ratings have declined. The stock trades for a forward P/E of just 5.5 times next year's earnings estimates. 

Still, the first episode of season 10 of The Walking Dead pulled in 4 million viewers, a number many shows would love to reach. Operating results have been decent, too, with revenue and earnings continuing to grow over the last five years. Revenue is up 3.1% in the first half of 2019, with adjusted operating income up slightly year over year. Analysts expect AMC to grow earnings just under 5% per year over the next five years, which makes the low valuation look out of whack. 

AMC should continue to grow. It has plenty of irons in the fire, including a growing streaming subscription business with Acorn TV, Shudder, Urban Movie Channel, and Sundance Now. These services added 400,000 subscribers in the first half of the year, which puts them on pace to reach over 2 million subscribers combined this year. 

Even though The Walking Dead is past its peak viewership, AMC has a gold mine with this franchise. A prequel, Fear the Walking Dead, has been running for a few seasons now, but there's a lot more in store, including a movie. Plus, it just sold a third Walking Dead series to Amazon Prime Video. 

AMC has had a knack for creating consistent hits over the years. Those hits have created a profit machine, and those profits allow the network to hire top talent. I wouldn't count AMC out, especially at a single-digit earnings multiple.

2. Tegna: A tollbooth to battleground states

Political campaign ads can be annoying, but it's a great business to be in if you own a local TV station in, say, Florida or Iowa. Tegna owns 62 television stations and two radio stations in 51 markets across the country. These stations reach one-third of all U.S. households. Most of its revenue is derived from advertising and marketing services, but Tegna has a growing stream of subscription fees paid by cable and satellite operators that make up nearly half of the top line, which helps smooth out the cyclicality of ad spending. 

The engine of its advertising segment is the even-year election cycles when political advertising is running at a fever pitch. With the 2020 election and the next Olympics cycle around the corner, this could be a good time to consider the stock, which is dirt cheap at a forward P/E of 7.2. 

Tegna is positioning itself to pull in more ad revenue with recent acquisitions. The company has already announced over $1 billion worth of deals this year, including Dispatch Broadcast Group and Nexstar Media Group. These add several stations affiliated with the Big Four public networks to Tegna's portfolio. And to management's credit, buying stations when valuations are very low in the industry seems a smart use of capital. 

Most importantly, these acquisitions will be accretive to the bottom line. Revenue and earnings will be down this year with no election or sports event to drive ad spending, but analysts expect the election year to push revenue up 21% in 2020. Earnings should improve to $2.11 per share, which is nearly double the 2019 estimate and 15% higher than the level reached in 2018.

3. Gray Television: This stock could double again in five years

Gray Television is another owner of local stations in swing states across the country. It operates in 93 TV markets, broadcasting across 150 affiliates of the Big Four networks, reaching 24% of all U.S. households. Following the merger with Raycom Media earlier this year, Gray Television became the largest owner of top-rated TV stations in the country. 

The Raycom deal was a big one, valued at $3.6 billion. It positions the company extremely well for future election cycles, bringing under Gray's corporate umbrella 62 stations ranked No. 1 in all-day Nielsen ratings in their markets. In addition to Raycom, Gray also made two other small deals, including the purchase of an NBC affiliate in Charlottesville, Virginia, for $12 million and a couple of CBS and FOX affiliates in Watertown, New York, and Mankato, Minnesota, for $45 million. 

The addition of Raycom caused revenue to double in the second quarter. Analysts expect it to increase by 13% to $2.38 billion next year, while earnings should improve to $2.92 per share, cresting the 2018 watermark of $2.37.

The stock could be severely undervalued at a forward P/E of 5.2 times next year's earnings estimates. The share price has already doubled over the last five years, but with the presidential election cycle heating up, there could be more gains in store.