This column is for investors willing to take more risk and potentially receive more reward.  The stocks mentioned in this column are not recommended to buy or sell.  They're brought to your attention so you can investigate them further to determine if they fit your risk profile.  Most of the stocks will have less than $1 billion of market capitalization, have more volatility than other stocks, and oftentimes no earnings.  And some will have tremendous stories.

March 19, 2010 - Arbitron Inc. (ARB-NYSE) provides media and marketing information services in the United States, Mexico and Europe. The company's services include radio audience estimates and related services to radio stations, advertising agencies, and advertisers in the United States; estimating national radio audiences and the size and composition of audiences of network radio programs and commercials; and providing software used for accessing and analyzing its media audience and marketing information data.

Arbitron has evolved the way it gathers information for radio broadcasters. It used to ask consumers to keep a diary, to write down their listening favorites and when they listened. That was OK but not as reliable as its Portable People Meter, a device worn by listeners which can hear an embedded tone from radio stations. It means more accurate information for radio stations. It also means higher revenues for Arbitron as it can charge higher prices for better data. Also, most of the contracts for using the Portable People Meter are for 5 years at a minimum with fees going higher each year of the agreement.

Revenues reflect the new pricing power. In 2007, they were $338.5 million, then $368.8 million, followed by $385 million. This year, 3 analysts have a consensus estimate of $402.3 million (up 4.5%), then $439.5 million for next year (up 9.2%).

Earnings were flat for 2007 and 2008 at $1.37, but improved last year to $1.43. This year, 5 analysts see a noticeable improvement to $1.64, then jumping to $2.02 next year. Since this company reflects the economy rather closely, earnings can be volatile.

And that's the word for the stock. In 2008, the price went from $51.50 to $9.90 in a matter of months as investors feared the worst. The economy was in a freefall, advertisers pulled ads from all media, the future looked bleak. But the world didn't end after all; broadcasters and advertisers realized the value of better information and hired Arbitron again.

More numbers: Here's a big one: debt is 82% of capital at $85 million. There's $8.22 million in the bank or 31 cents a share. Price to sales ratio is 1.72. Price to book is 21.63. Book value is $1.15. Operating margin for the last 12 months was 16.84% while Profit margin was 10.95%. Return on equity for the last 12 months was a remarkable 524% ( the range for the last 5 years has been between none and 84% with three years at 68%, 57% and 84%). Beta is a rather high 1.47. The stock is up 85% in the last 12 months. There are 26.54 million shares outstanding. Insiders own 17.36% of the stock. Institutions own most of the float. There is a dividend of 40 cents a share for a yield of 1.6%. The dividend takes 25% of earnings to pay. Next dividend payment is on March 31. Ex-dividend date was March 11.

Aggressive investors will find this story of interest. While the company is highly leveraged, it is evolving its product with success. Radio broadcasters like the new PPM. It gives better data which makes for better decisions. And they're willing to pay for the service, a little bit more each year they use it. That should mean better earnings for ARB as it sells into new markets and secures 5 year contracts. And if the economy is ready to recover, Arbitron will see sales grow faster than estimated. But remember that huge slide in 2008. Anyone riding the stock from $51 to $10 certainly won't.

- Company Web site: www.arbitron.com

 Ted Allrich