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Cash is King and so Are Sinclair and Nexstar

Here's the impressive 1-year price chart for both companies. Yet the few analysts who follow these companies say there may be a lot more upside within the next 2 years. SBGI Chart SBGI data by YCharts

Both companies' stock hit new 52-week highs on Oct. 4, yet Nexstar trades at a current P/E of less than 8 and a forward (1-year) P/E of only 12.56. Sinclair's two P/E ratios are 24.4 current and a low 11 for the year ahead.

Both stocks can suddenly correct especially on any news that the FCC may be considering proposals that limit the extent that broadcast companies can grow by acquisitions and mergers.

Also making a correction possible is that shares of both companies have skyrocketed since the beginning of September. Yet the stocks' valuations are not much higher than they were two years ago.

Sinclair pays a dividend with a yield-to-price of 1.73% and Nexstar's dividend yield is 1.07%. Even with the current surge higher, Nexstar trades at around 8 times 2014 estimated cash flow (EBIDTA earnings) and Sinclair at around 6 times 2014 EBIDTA cash flow.

The FCC may continue to sponsor auctions that allow wireless operators to buy spectrum for billions of dollars. Sinclair's spectrum alone is estimated to be worth $3 billion or $36 a share. Nexstar's spectrum may command a value of $800 million, or $25 a share.

So using a baseball analogy, this lucrative game might still have 4 innings or so to go. The FCC's most recent plan is to eventually hold an incentive auction to motivate broadcasters to return their spectrum in exchange for enormous, one-time payments.

This voluntary auction is scheduled for next year but may be delayed. Sinclair has stated it would rather lease spectrum than sell it while continuing to operate its profitable businesses, especially its local TV stations.

Nexstar may go a different route, or, be acquired by a bigger company like a major network such as CBS (CBS).

Any way you slice it, the value of spectrum will be a powerful catalyst for the two companies stock for years.

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