As I was looking for growth shares to help future-proof my holdings, one pick that I came across was ITV (LSE: ITV).
You might – like me, at the start – be wondering how ITV fits into growth stock territory. Let me break it down.
Iconic broadcaster
I have many fond memories – before the world of digital TV – of watching ITV programs with my parents, siblings, and even grandparents. Steeped in history and prestige in the UK television market, ITV has grown to become the biggest commercial broadcaster in the country. It still continues to churn out favourites such as Coronation Street, on air for decades, as well as more recent icons like I’m a Celebrity…
Despite ITV’s popularity, the shares haven’t had the best time in recent years. Over a 12-month period, they’re up 9% from 71p at this time last year, to current levels of 78p.
Recent woes and risks to note
As I touched upon earlier, the digital revolution has hampered more traditional broadcasters like ITV. Being able to access lots of content at their fingertips, whenever they want, has led consumers to shift towards other platforms. The most popular names include Netflix, Apple TV, and Amazon Prime, to mention a few. This changing of the guard has threatened ITV’s status, and earnings and returns.
My other issue is the impact of economic volatility on advertising revenue. This is usually a big money spinner for broadcasters, especially ITV. Advertising spending is usually first on the chopping block when volatility hits and businesses scramble to conserve cash. This has hurt ITV in recent times, but once volatility dissipates, a spending increase could boost its earnings and growth.
Looking ahead and fundamentals
I reckon exciting growth could come from ITV’s own streaming platform, ITVX. It has invested heavily into this, in keeping with changing habits around the way the world consumes content. Signs from its recent half-year report show this investment is paying off. Streaming hours rose 15% compared to the same period last year.
Furthermore, ITV Studios – its production business – has produced some fantastic content in recent years. Stand out names include I’m a Celebrity, and Love Island. It also produces content for other platforms, which can help grow earnings and returns.
From a fundamental view, the shares trade on a price-to-earnings ratio of close to eight, making the shares look extremely attractive. Furthermore, a dividend yield of over 6% is enticing as a passive income opportunity. However, it’s worth noting that dividends are never guaranteed.
Final verdict
Despite challenges to navigate, I reckon ITV has some great growth prospects ahead. It looks to be backing itself to grow and pivot to the changing face of content consumption, based on investment recently.
In addition to this, once economic turbulence clears, advertising spend could be another avenue for the business to grow earnings. Plus, this could further boost investor sentiment and potentially the share price too. Furthermore, the fundamentals look attractive to me with a good entry point, and passive income opportunity.
If I had some cash to buy some shares today, I’d happily do so.
The post I think this FTSE stalwart is one of the best growth shares around! appeared first on The Motley Fool UK.
Should you buy ITV now?
Don’t make any big decisions yet.
Because Mark Rogers — The Motley Fool UK’s Director of Investing — has revealed 5 Shares for the Future of Energy.
And he believes they could bring spectacular returns over the next decade.
Since the war in Ukraine, nations everywhere are scrambling for energy independence, he says. Meanwhile, they’re hellbent on achieving net zero emissions. No guarantees, but history shows…
When such enormous changes hit a big industry, informed investors can potentially get rich.
So, with his new report, Mark’s aiming to put more investors in this enviable position.
Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!
Grab your FREE Energy recommendation now
More reading
My 5 favourite stocks to consider buying right now
3 of my favourite cheap growth shares for September!
5 FTSE stocks Fools think will lead the next bull market charge
Here are 3 of my favourite FTSE 250 dividend stocks for passive income
5 UK growth shares that Fools think are dirt cheap
Sumayya Mansoor has no position in any of the shares mentioned. The Motley Fool UK has recommended ITV. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
