We came across a bullish thesis on Boston Omaha Corp. (NYSE:BOC) on ValueInvestorsClub by AlexB91. In this article, we will summarize the bulls’ thesis on BOC. The company’s shares were trading at $15.00 when this thesis was published, vs. the closing price of $13.66 on Jan 08.
A busy street with pedestrians and cars, a billboard advertising the public company’s services in the background.
BOC engages in a number of businesses that include outdoor billboard advertising and rural fiber-to-the-home broadband. It is also involved in the surety insurance and related brokerage, broadband, and asset management businesses.
2025 is set to be the year when earnings stabilize amidst normal General & Administrative Expenses and a maturing broadband business. The broadband segment is where much of the capex is focused, offering the potential to increase the base for re-investable cash flows. The expected EBITDA with no growth in this business is believed to be $20 million, with a return on capital of 9-11%. The current fiber infrastructure laid has a penetration of 38% and can increase to 55%, increasing EBITDA by $5 million. Bears have been vocal in promoting Starlink as a threat to BOC but this argument does not hold ground since Starlink has a higher cost per subscriber and is not economically feasible for locations served by fiber networks.
Link Media Holdings, BOC’s outdoor advertising arm, is a low capital intensity business offering potential for increasing cash flows and higher yields on additional investment. The sector is highly regulated, limiting supply and at the same time offers a low-cost avenue for regional and national advertisers. The current EBITDA of $18 is a good proxy for the cash flow generated from this business.
Applying a modest growth in EBITDA for advertising and broadband businesses and using a multiple of 10-15x results in a value for Link at $8.19-$10.90 and Boston Omaha Broadband at $6.85. Investments at market value for Sky Harbour along with cash balance account for an additional $10/per share. The sum of its parts adds up to $25-$29, implying that the current price is almost 50% lower than its intrinsic value.
While we acknowledge the potential of BOC as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than BOC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article was originally published at Insider Monkey.