Wanda Sports Group Stock Price Plummets After Earnings

in EARNINGS/INVESTING IDEAS/MARKET MOVING by

Wanda Sports Group Company Limited (NASDAQGS:WSG) reported Q3 earnings results this morning. Wanda Sports Group is a leading global sports events, media and marketing platform headquartered in China.

According to Business Wire WSG completed its IPO on July 26, 2019, offering 23.8 million American Depositary Shares (“ADSs”) at $8.00 per ADS. The IPO raised over $190 million in net proceeds. On the first day of trading the company’s stock price opened at around $6/share and at the current trading price of $2.83 represents a decline of approximately 65%.

Since the IPO, the company has had a tumultuous ride. The company’s CEO resigned as the company reported dismal financial results for Q2 of 2019, including a 30% year-over-year decline in total revenue.

The company’s loss for the latest quarter was €31.2 million (US$34.0 million), compared to a profit of €13.1 million for the third quarter of 2018. Management attributed this loss primarily to finance cost relating to the company’s unsecured senior loan facility; the stock-based compensation for our Management Equity Incentive Plan arise from IPO and the increase in income tax expenses. Other key highlights from the report:

  • Total revenue was €245.2 million (US$267.4 million), representing an increase of 8% year-over-year.
  • Adjusted EBITDA was €39.3 million (US$42.8 million) in the third quarter of 2019, substantially similar to the third quarter
    of 2018.

After the last earnings report for the period ending June 30, 2019, the stock price also reacted by falling by -1.3%.

Fundamentals And Technical Analysis

Wanda Sports is currently trading at $2.83/share, down over 12% for the day. The company is trading at approximately 35% of its IPO price of $8.00/share.

The share price as of close on Friday November 17, 2019, implies a price-to-earnings (P/E) multiple of 8.8x and a forward P/E multiple of 16.7x. Wanda Sports’s current share price also implies a price-to-book (P/B) multiple of 1.2x. The following table summarizes some other key fundamental ratios:

Data as of November 17, 2019
Metric Value
Last Fiscal Period FY2019.Q2
Period End Date June 30, 2019
Stock Price (Current) $3.24
P/E Ratio 8.8x
P/E Ratio (Fwd) 16.7x
PEG Ratio 0.1
Total Debt to Capital (%) 71.4%
Levered Free Cash Flow $42.647 million
Enterprise Value / EBITDA 11.1x

Company Profile: Wanda Sports Group Company Limited

Wanda Sports Group Company Limited is a small-cap stock with a market capitalization of $388.2 million and a total enterprise value of around $1 billion. The company operates in the Communication Services sector and Entertainment industry.

Wanda Sports Group Company Limited operates as a sports events, media, and marketing platform worldwide. The company engages in the rights distribution, broadcast hosting, digital media and entertainment, program production, event operations and licensing, and brand development and sponsorship activities. It operates through three segments: Mass Participation; Spectator Sports; and Digital, Production, Sports Solutions (DPSS).

The Mass Participation segment organizes, operates, and monetizes a range of mass participation sports, including triathlon, running, mountain biking, road cycling, obstacle course racing, and trail running through a portfolio of brands and other intellectual property.

The Spectator Sports segment monetizes rights acquired from rights owners under contractual arrangements through media distribution, sponsorship, and marketing activities; and provides services to its rights-in partners and rights-out clients covering event operation and support, media production, digital solutions, and ancillary services. This segment includes a portfolio of sports, such as football, and winter and summer sports.

The DPSS segment offers a suite of specialized sports-related services, including digital media solutions, media and program production, host broadcasting, marketing, event operations, brand development, and advertising solutions.

The company was founded in 2018 and is headquartered in Beijing, the People’s Republic of China. Wanda Sports Group Company Limited operates as subsidiary of Wanda Holdings Group Co. Ltd.

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