ETO – Entertainment One – Trading Update

ETO (Entertainment One) released a trading update today (, sending the shares down 8.4% to 158p. EBITDA was up 15%, but revenues were down 3%.

I wrote about ETO in November (, when the price was 226p. I did not like it at all: the company earned low returns on capital, had substantial debt, debtors days were rising, and their free cashflow was poor.

ETO attracts a lot of investor excitement. There are investors, much savvier than me, who are positive about it. However, I maintain that there is nothing special about this company. Historically, revenues had grown because the directors have thrown capital at the problem, and done a poor job at allocating it, too. Investors must be disappointed to see revenues declining.

Such a miserly dividend, too; investors should take that as a hint that the free cashflow is worse than the P&L account would have them believe.


02-Mar-2016 Edit: fixed typos and grammar


About mcturra2000

Computer programmer living in Scotland.
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