In the last six months the ITV (LSE: ITV) share price has fallen by around 28%. During that time, it has shown little, if any, sign of mounting a successful comeback. And with the prospects for the UK economy being relatively uncertain, the outlook for the media stock could prove to be challenging.
Of course, this could present a buying opportunity for long-term investors. The company appears to offer a wide margin of safety and improving prospects. Therefore, it could be worth buying alongside another relatively cheap stock which released a trading update on Wednesday.
Improving prospects
The company in question is online gaming entertainment and solutions provider, 888 (LSE: 888). Trading in the 2018 financial year has been relatively strong, with the company on track to meet its guidance for the full year. It has continued its momentum across regulated European markets, as well as in Sport and Casino segments. The release of a new Casino platform is evidence of its focus on product enhancement, with the positive trends which were reported part-way through the year set to continue.
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The growth potential of sports betting in the US could deliver improving financial performance for the business in the long run. It is growing its exposure to the segment, with it seeking to roll out 888sport across further states as regulations allow following its recent launch in New Jersey.
With 888 trading on a price-to-earnings (P/E) ratio of 11 after a share price fall of 36% in the last year, it could offer a margin of safety. With earnings due to rise over the next financial year, the stock may prove to be risky, but highly rewarding, in the long run.
Turnaround potential
As mentioned, the recent performance of the ITV share price has been hugely disappointing. The company is facing a period of reduced confidence among businesses and consumers, with Brexit seemingly a major cause. With the process of leaving the EU likely to remain headline news over the next few months, the company’s shares could even come under further pressure as investors factor in potential challenges over the medium term.
However, for investors who are seeking to buy high-quality companies at low prices, ITV could be a worthwhile opportunity. The business has a strong position within its key markets, and appears to have growth potential through its Studios segment, as well as in the digital arena. Although its strategy is still somewhat unclear, its management team is set to refresh its growth plans following a period of strong operational, but not necessarily financial, performance.
After its share price decline, the stock has a P/E ratio of 8.5. While there is scope for this to move lower, it could be argued that the market has already priced in the difficulties it may face over the short run. Therefore, from a long-term perspective, it could be a worthwhile investing opportunity in my opinion.
