I really like the FTSE 250. Many companies on the index typically go beneath the radar. However over time, it has confirmed it may nonetheless present traders with substantial progress alternatives.

That’s why I opened a place in ITV (LSE: ITV) earlier this yr. The broadcaster wants no introduction. Right this moment, the corporate has a £3.2bn market cap. A share would set potential traders again 79.3p.

The inventory hasn’t been the perfect performer within the final 5 years. However may now be an opportunity to snap up some undervalued shares?

Share price efficiency

Throughout that interval, the inventory is down 27.1%. For context, the FTSE 250 has climbed 7.8% greater throughout the identical time. Protected to say traders who bought ITV again then wouldn’t be finest happy with their funding up to now.

Fortunately, I picked up ITV simply earlier than the inventory started to choose up tempo. Yr so far, it’s up 6.3%. Within the final yr, it has risen 8.5%.

With that, its shares now commerce on 15.3 occasions earnings. That’s not at all a discount. The FTSE 250 common is round 12. Nonetheless, I nonetheless assume that’s good worth for cash for a enterprise like ITV.

A meaty yield

On high of that, there’s a 6.3% yield at play. That’s almost double the FTSE 250 common of three.2%. There are greater yields on the market on the index. For instance, Ithaca Power pays an unbelievable 16.4%. Nonetheless, I like ITV as an earnings inventory for a couple of causes.

Firstly, its payout is roofed 1.7 occasions by earnings. That’s slightly below the benchmark of two however it’s nonetheless a wholesome cowl. That’s essential as dividends are by no means assured.

Administration clearly has the purpose of boosting shareholder returns within the years to come back, which I like to see. It paid a dividend of 5p per share final yr, the identical as in 2022. Nonetheless, the board has outlined its intention to develop its payout over the medium time period.

What’s extra, alongside its sale of BritBox it introduced a £235m share buyback scheme with the proceeds. On 4 June the agency launched an replace saying it had purchased again an extra 792,616 shares, taking its complete quantity of repurchased shares to over 54m.

A dying business?

The mixture of worth and earnings makes ITV a pretty funding proposition. However, I do see one main threat.

Its share price has underachieved over 5 years and there’s motive for that. The normal promoting market, which is considered one of ITV’s principal sources of earnings, has weakened.

Components corresponding to racing inflation, in addition to the rise of streaming suppliers corresponding to Netflix, has dragged on the business and seen clients in the reduction of on spending. Navigating this may proceed to be a problem for the broadcaster shifting ahead.

A discount?

I feel ITV shares are good worth for cash. And given the course its share price has been trending in not too long ago, it looks like traders additionally agree. The enterprise is shifting its consideration away from conventional promoting to extra trendy streaming companies, and it appears to be paying off.

Even with its rise, I nonetheless assume it appears to be like like nice worth at at the moment’s price. My plan is to slowly improve my place within the FTSE 250 constituent over the approaching months with any investable money I’ve.