LAMAR ADVERTISING CO/NEW (LAMR) stock intrinsic value fair value estimate & owner earnings analysis

Lamar Advertising is the largest outdoor advertising company in North America, organized as a real estate investment trust. It owns and operates roughly 365,000 advertising displays -- traditional and digital billboards, roadside logo signs, and transit advertising -- across most of the United States and parts of Canada. About four-fifths of its revenue comes from local and regional advertisers spread across many industries, with no single tenant accounting for more than about 2% of revenue. The company's main growth lever is converting traditional static billboards to digital displays. Digital boards are a small fraction of the total structure count but already generate roughly a third of billboard advertising revenue, because a single digital face can be sold to several advertisers on a rotating basis rather than just one. The company continues to invest here: of $181 million spent on capital projects in 2025, about $91 million went to digital technology, and it has guided to roughly $186 million of capital spending in 2026. A separate, durable advantage is that local zoning and sign ordinances make it very difficult to build new billboard structures in most of the country, which limits new competition against the sites Lamar already owns or controls. Two accounting items in the last two years are worth explaining because they affect the reported numbers without reflecting the ongoing earning power of the business. First, depreciation expense jumped in 2024 (to $463 million from a more typical $250-350 million range) because the company revised its cost estimates for eventually removing billboard structures; this reversed in 2025 (back to $326 million) and was treated as a one-time item rather than as a change in the trend. Second, 2025 net income included a one-time gain of about $76 million from selling Lamar's equity stake in Vistar Media along with some billboard sites and displays; this gain does not represent recurring cash-generating power and has been excluded from the earnings figure used in this valuation. As a REIT, Lamar is required to pay out most of its taxable income as dividends (it paid out roughly $656 million in 2025), which leaves relatively little cash retained inside the business -- growth is instead funded by a mix of operating cash flow and borrowing. The company carries a meaningful amount of debt, part of which was refinanced in 2025 at whatever rates prevailed at the time; further refinancing at higher rates than the older debt it replaces is a real, ongoing risk. Our base case assumes the digital-conversion growth engine continues at a solid but moderating pace over the next several years, slowing gradually as the best remaining conversion opportunities get used up, and then settling into a slow, structural growth rate in later years tied to the same scarcity-of-new-supply dynamic -- essentially the ability to raise advertising rates on a largely fixed base of structures, similar to a landlord raising rent where new construction is restricted. On these assumptions, the shares appear to be worth around $144. The bear case reflects a broader pullback in advertising spending that falls hardest on the small and local businesses that make up most of Lamar's tenant base -- something the business showed some resilience to in 2020, but a deeper or more prolonged version of that stress -- combined with the fact that a meaningful share of its site costs are fixed, multi-year lease payments that don't shrink quickly when revenue softens, and higher interest costs as debt gets refinanced. Under that combination, the shares would be worth roughly $106. The bull case assumes the digital-conversion program runs faster and further than the base case, continued disciplined smaller acquisitions of outdoor advertising assets (something Lamar has done consistently for years), and full realization of pricing power on its remaining static inventory. Under that combination, the shares could be worth roughly $188. Given the fairly narrow gap between the bear and base cases, this looks like a comparatively predictable, real-asset-backed business rather than a speculative one, so the margin-of-safety price sits meaningfully below fair value without the very large discount a riskier business would require. On that basis, the margin-of-safety price is near $122, a level at which the softer scenario still implies a positive long-term outcome. One modeling judgment worth noting: a portion of Lamar's reported capital spending each year builds new displays and expands the business rather than simply maintaining existing structures, and that growth-oriented share has been separated out and excluded from the ongoing cost figure used above. Everything used in this analysis traces to Lamar's audited financial statements; nothing needed to be estimated from outside sources.