Over the past six months, Nexstar Media’s shares (currently trading at $149.58) have posted a disappointing 15.5% loss while the S&P 500 was down 2.9%. This was partly driven by its softer quarterly results and may have investors wondering how to approach the situation.

Is now the time to buy Nexstar Media, or should you be careful about including it in your portfolio? Get the full stock story straight from our expert analysts, it’s free .

Why Is Nexstar Media Not Exciting?

Despite the more favorable entry price, we're sitting this one out for now. Here are three reasons why NXST doesn't excite us and a stock we'd rather own.

1. Long-Term Revenue Growth Disappoints

Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, Nexstar Media grew its sales at a 12.2% annual rate. Although this growth is acceptable on an absolute basis, it fell short of our standards for the consumer discretionary sector, which enjoys a number of secular tailwinds.

2. Revenue Projections Show Stormy Skies Ahead

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect Nexstar Media’s revenue to drop by 8.4%, a decrease from its 1.9% annualized growth for the past two years. This projection is underwhelming and implies its products and services will see some demand headwinds.

3. Cash Flow Margin Set to Decline

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Over the next year, analysts predict Nexstar Media’s cash conversion will fall. Their consensus estimates imply its free cash flow margin of 21.4% for the last 12 months will decrease to 17.2%.

Final Judgment

Nexstar Media isn’t a terrible business, but it doesn’t pass our quality test. After the recent drawdown, the stock trades at 11× forward price-to-earnings (or $149.58 per share). This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're pretty confident there are superior stocks to buy right now. We’d recommend looking at one of our all-time favorite software stocks .

Stocks We Would Buy Instead of Nexstar Media

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