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Is Nine Entertainment a buy?

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The Nine Entertainment Co Holdings Ltd (ASX: NEC) share price has struggled over the years.

The entertainment company’s shares were trading for around $2.32 back in May 2015 before they began to slide, shedding more than 60 per cent by October 2016.

Since then Nine Entertainment shares have been heading up, gaining more than 50 per cent in the past year.

But will it continue?

Nine Entertainment’s portfolio includes stakes in websites such as caradvice.com and RateCity, the video-on-demand service Stan which is a joint venture with Fairfax Media Limited (ASX: FXJ), and its television operations.

While free-to-TV has suffered amid the rise in popularity of video content streamed on the internet, Stan provides Nine Entertainment with a degree of exposure to the lucrative online market.

At the company’s AGM Chairman Peter Costello emphasised that Stan has “continued its steady march to break-even, with active subscribers growing 50 per cent across the year”.

But can Stan really compete with dominant players in the space such as Netflix?

Regulatory changes in 2017 that have also added optimism to Nine’s prospects, and the media industry as a whole, opening the doors to a wide possibility of mergers provide Australia’s media companies with opportunities previously restricted.

If Nine manages to find ways to capitalise on the recent reforms perhaps the company can improve on its financial standing.

For financial year (FY) 2017 Nine reported revenue of about $1.24 billion, down 3 per cent on the previous year.

That resulted in a statutory net loss of around $203 million.

While some are backing Nine, such as WAM Capital Limited (ASX: WAM), it is difficult to identify any strong signs that the entertainment company will return to its glory days.

Nine’s EBITDA for FY 2018 is forecasted to come in at between $186 million and $207 million.

Even if Nine hits the upper end of that scale it would only represent a marginal improvement on FY 2017’s EBITDA of $206 million.

I wouldn’t rate Nine as a buy.

But things should be clearer when the company releases its interim results due next month.

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Motley Fool contributor Steve Holland has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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