Comcast: High Growth Likely To Continue For Investors

Nov.15.13 | About: Comcast Corporation (CMCSA)

The nation's largest provider of video, high-speed internet and voice services to residential customers has beaten the market over the long term with its above average growth. This high growth should continue as Comcast (NASDAQ:CMCSA) is still growing revenue in each of its key segments.

For the first nine months of 2013 ending on September 30, Comcast achieved increases in all segments except for advertising which decreased by 2.8%. Here is how the key segments performed:

Video, which comprises 49.4% of total revenue, increased 3.1% year-over-year to $15.4 billion. Although Comcast experienced a decrease in customers, revenue increased as a result of price adjustments and customers receiving additional and higher levels of service. The amount of video customers decreased as a result of competition and as a consequence of rate adjustments.

High-speed Internet, which comprises 25% of total revenue, increased 8.1% to $7.7 billion. Gains in this segment resulted from having a higher number of residential customers, higher rates and customers receiving higher levels of service.

Voice, which comprises 8.8% of total revenue, increased 2.5% to $2.7 billion. The voice segment increased primarily as a result of a higher number of customers receiving service through bundled packages.

Business Services, which comprises 7.6% of total revenue, increased 26.8% to $2.4 billion. This segment benefited from a greater number of business customers and due to an expansion of services to medium-sized business customers.

Comcast's advertising segment decreased as a result of lower political ad revenue in 2013 as compared to 2012. Advertising comprises 5% of Comcast's total revenue.


Comcast is currently valued approximately in-line with the overall market as measured by the S&P 500. The company has a trailing P/E of 19.9 and is trading at 16.7 times next year's earnings. The PEG of one conveys that Comcast has strong expected annual earnings growth of 19%. The stock is trading with an EV/EBITDA of 7.92 and a price to book ratio of 2.5. Overall, Comcast looks fairly valued in relation to the market and its competitors.

Here's how Comcast's valuation compares to competitors:


Verizon (NYSE:VZ)


DirecTV (DTV)

Dish Network (NASDAQ:DISH)

Trailing P/E






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Price to Book Ratio












Price to Sales






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Growth Catalysts

Comcast just announced that it will begin selling movies for download and streaming through its set-top boxes and Xfinity TV website. Currently, the company offers rentals through its on-demand service for a specific time period. The new service will allow customers to watch movies anytime on a TV, PC or mobile devices. The service is also expected to add a number of new releases, older movies and TV shows to Comcast's repertoire. This expansion of the current on-demand service should provide the company with additional revenue as it becomes easier to access the content. This move is to generate more revenue per customer as the company lost 129,000 video customers in Q3.

High-Speed internet is another growth area for the company. Customers are increasingly upgrading to higher speeds and Comcast gained 297,000 new internet customers in Q3. Many households consider high-speed internet an essential need in the modern world. So this segment should continue to grow revenue and earnings for Comcast in the future.

The Risks

The biggest risk for Comcast is the threat of competition. In addition to satellite TV companies taking away market share, Verizon is expanding its Fios service in Comcast territories. Customers in and near cities can get free digital broadcast TV with an antenna. Some customers are canceling their cable to save money. Comcast must continue to generate more revenue per customer to offset the loss of market share.


Comcast looks like a strong company for the long term. It still has a stronghold on the video market despite some loss of customers. The company's fair valuation and expected annual earnings growth of 19% for the next five years should allow the stock to outperform the S&P 500 over the long term. The 32 analysts covering the company have a one-year price target of $53 for the stock, which is currently trading at $47.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.