It will be toasts and talk of bonuses at ITV this Christmas as management savours a year to remember: a startling recovery has brought the broadcaster more advertising income than at any time in its 66-year history, TV production revenues are back above pre-pandemic levels and a belated foray into streaming is starting to pay off.

And yet as Carolyn McCall enters her fourth year as chief executive she will be wondering why investors – and potential buyers – still do not view the company as a rejuvenated, digital-age crown jewel of British broadcasting.

When McCall left easyJet to take the reins from Adam Crozier, now installed as BT’s new chairman as the telecoms giant becomes a takeover target for billionaire investor Patrick Drahi, investors valued ITV at £7.25bn.

The broadcaster’s market capitalisation has remained stubbornly well below that level ever since, with a current valuation at £4.3bn. Despite that reduced price and the rush of foreign private equity firms snapping up UK firms this year, there is no sign of any takeover suitor as yet.

“The problem is that fairly or unfairly it is perceived as an ex-growth business,” said one City source. “From time to time it is talked about as a target, everyone knows it’s there, but no one has taken it out. The market decided some time ago that companies that are dependent on TV advertising were not going to be worth much again. The world’s stock markets have stuck with that credo, ascribing value to companies seen as in the digital space.”

The pandemic recovery has ITV’s ad business firing on all cylinders. Its portfolio of channels accounts for about 40% of the UK’s £3.7bn traditional TV ad market, with more good news expected next year with sectors including travel, cars and high street retail forecast to return along with the advertising gold of the next football World Cup.

McCall’s focus is to get investors to reassess ITV beyond the narrow focus on TV advertising – 60% of the broadcaster’s total revenues come from non-advertising sources – by beating the drum for its digital and media content businesses.

Earlier this month, she unveiled a five-year plan for ITV Studios – which makes in-house shows such as Coronation Street, I’m a Celebrity … and Love Island, as well as third-party productions such as Line of Duty for the BBC and Countdown for Channel 4 – with a firm eye on exploiting the surge in demand for expensive, prestige TV shows from streaming platforms such as Netflix.

She unveiled the eye-catching goal of increasing the proportion of ITV Studios’ total revenues accounted for by commissions from streaming companies to a quarter, up from 14% this year, and doubling the number of hours of high-end scripted TV shows to 400.

“We have grown our revenues from streamers as we have tilted our business towards the strong growth in demand from that part of the market,” said Julian Bellamy, managing director of ITV Studios, at a presentation for analysts and investors.

The third element of McCall’s vision is to build a convincing domestic streaming business in ITV Hub, which also offers an ad-free, paid-for tier in the form of ITV Hub+, and internationally through its BritBox joint venture with the BBC.

Last month, McCall hailed the progress at ITV Hub, calling it an “increasingly scaled digital business”, with monthly active users hitting 9.6 million and online viewing climbing by almost 40% year-on-year to 494m hours in the first nine months of 2021.

While ITV Hub is a success story among traditional broadcasters – analysts at Ampere estimate it makes more in ad revenue than similar services run by all other major commercial broadcast groups in western Europe combined – it remains small in a world dominated by digital beasts such as Netflix, Disney and Amazon. Its reach is also dwarfed by its biggest British rival, the ad-free iPlayer, which is currently on track to break 6bn streams in a year for the first time.

Just 4% of the 12bn total hours of video from all sources watched by ITV viewers in the first nine months of the year was on ITV Hub, which as it grows risks cannibalising the broadcaster’s far more profitable traditional TV business.

“The digital story is anaemic,” says one City source. “They didn’t prioritise it before. They came at it late. ITV Hub and BritBox will become successful, but on a very small scale, not significant enough to re-rate the business.”

Business fundamentals aside there is, of course, a significant impediment to any potential takeover in the form of John Malone’s Liberty Global (LG), ITV’s largest shareholder. LG, which earlier this year merged Virgin Media with mobile firm 02, has held a 9.9% stake in ITV for the last six years.

“They have always been a deterrent, a very serious media company that no one wants to piss off,” says Claire Enders, of Enders Analysis. “They aren’t your average garden variety deterrent, they are a big monster deterrent.”

While ITV may not be at the top of a private equity or trade buyer shopping list, the broadcaster has an ambitious, TV landscape-changing potential target of its own: Channel 4.

ITV has quietly been positioning itself as the ideal solution for the government’s potential privatisation plans – a British consolidator giving both broadcasters a boost in scale – although the resulting 60%-plus share of the UK TV ad market would have advertisers and rivals up in arms and the competition regulator on high alert.

There is change planned at the top next year, with Peter Bazalgette expected to step down after six years as ITV’s chair, and nine on its board, when his term expires in May. With Rona Fairhead, the former chair of the BBC Trust, tipped as a contender to replace him and become the first woman in the role, ITV’s mission to become a “loved” stock will continue.

“It is not viewed as a badly run business, it is efficiently and well run,” said Enders. “Every part of their business is doing extraordinarily well at this time. A couple of exceptional years and people will see the core of the business is not in this secular decline. ITV is not getting the credit it should, but it will do.”