Peter HodsonStingray Group (Stingray Group Stock Quote, Chart, News TSX:RAY.A) has been in the literal and figurative background for too long, says Peter Hodson of 5i Research. While perhaps known for its wallpaper music services in stores and on the TV, Hodson says that the serial acquirer in the Canadian media landscape consistently shows strong fundamentals, and with the recent pickup of radio company Newfoundland Capital, Stingray could be poised for a bounce-back year in 2020. Known for its Music on TV service which has a surprisingly huge audience — try 15 million Canadians over a given two-week period — Montreal-based Stingray made headlines last year with a $506-million purchase of Newfoundland Capital (NCC), one of the country’s biggest private radio broadcasters with 101 radio licenses across Canada. The deal was just one of a string of acquisitions by Stingray in recent years, as the company looks to consolidate in the media sector. But the major purchase has set Stingray back and made the stock look a little less attractive, at least until they pay off some of that debt, says Hodson, founder and head of research at independent research firm 5i Research, who spoke to BNN Bloomberg on Thursday. “It’s a bit of an misunderstood company —it’s a music and radio operator now. It generates pretty good cash flow but debt is very high,” says Hodson. “But their dividend record is pretty good. You can barely go a quarter without them increasing their dividend. So they need to pay down that debt and I think they kind of need to do a little investor relations because people see it as background music in a retail environment,” he says. “What they hear, retail environment, they say, ‘Well nobody wants that. Why don’t they just put on Spotify or Apple Music? Why is this company even around?’ But they have substantial revenues and there are all sorts of rights and regulations about music and about where you can and can’t play it,” says Hodson. Stingray has performed poorly over the past couple of years, dropping 30 per cent over 2018 and coming out of 2019 flat. But the company’s finances look pretty good. Ahead of its fiscal third quarter financials due in the first week of February, Stingray’s Q2 featured a 121-per-cent increase in revenue to $76.6 million, thanks to the NCC deal, while adjusted EBITDA climbed 142 per cent to $27.7 million and EBITDA margin went from 32.9 per cent to 36.1 per cent. “We are pleased with our second quarter results which continued to build on the significant momentum created by the acquisition of NCC, coupled with the solid growth from the Broadcasting and Commercial Music segment,” said Eric Boyko, president and CEO, in a quarterly press release in November. “A key measure of our achievement continues to be our Adjusted free cash flow which more than tripled to $18.8 million. For the first six months of the year, we have generated $0.52 of Adjusted free cash flow per share compared to $0.21 a year ago,” he said.