Should We Follow Steven Cohen Into Nexstar Broadcasting Group, Inc. (NXST)?

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Several days ago, Steven Cohen, the famous hedge fund manager, accumulated nearly 1.57 million shares in Nexstar Broadcasting Group, Inc. (NASDAQ:NXST). Interestingly, this company is currently in the portfolio of many other successful investors, including Joel Greenblatt and Jim Simons. Since the beginning of the year, Nexstar Broadcasting Group, Inc. (NASDAQ:NXST) has gained as much as 157% on the market. Is Nexstar Broadcasting Group, Inc. (NASDAQ:NXST) still a good buy after the recent significant rise in its share price?

Impressive first quarter results

Nexstar Broadcasting Group, Inc. (NASDAQ:NXST) is a television broadcasting and digital media company, operating around 64 television stations and 14 digital multi-cast channels in 38 markets in the U.S. The company reported that those stations had around 12.7 million viewers, representing 11.1% of all U.S. television households. The majority of its revenue, $190.17 million, or 47.8% of the total net revenue, was generated from local advertising. National advertising ranked second, with more than $76.1 million in 2012 revenue, while the retransmission compensation and the political advertising contributed nearly $61 million and $46.3 million in sales, respectively.

Recently, the company announced impressive first quarter earnings results. Its local and national core revenues increased 32.6%, from $62.84 million in the first quarter last year to $83.3 million to the first quarter 2013. Overall, the net revenue experienced a high year-over-year growth of 34.2% to $112.2 million. The operating income grew by 1.8% to $17.8 million. Because of a much higher interest expense, its net income came in at only $705,000, much lower than net income of $3 million in the first quarter last year.

Significant leverage and high multiples

What worries me is its significant leverage. As of March 2013, it had $928 million in total debt while cash on hand stayed at only $22.6 million. However, the total net leverage ratio was 4.24, lower than the permitted leverage covenant of 7.25. Nexstar Broadcasting Group, Inc. (NASDAQ:NXST) is trading at around $27.20 per share, with a total market cap of $799.8 million. It seems to be quite expensively valued now as its EV/EBITDA is 10.45. Compared to its much bigger peers, including DIRECTV (NASDAQ:DTV) and CTC Media, Inc. (NASDAQ:CTCM), Nexstar Broadcasting Group, Inc. (NASDAQ:NXST) has the highest valuation among the three.

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