Should You Buy Comcast, Or This Industry Peer?

Team Money Research
1.42K Followers

Summary

  • We pitch two companies from the broadcasting and cable TV sector, Comcast and DIRECTV, against one another in the latest instalment of our Head-To-Head series.
  • The article focuses on the relative strengths and weaknesses of Comcast and DIRECTV based on business performance and sustainability/dividends/forecasts.
  • It ends with discussion of the current valuations of the two companies, and details whether Comcast represents good relative value at current price levels.

Comcast Background

Comcast (NASDAQ:CMCSA) operates as a media and technology company worldwide. It operates through Cable Communications, Cable Networks, Broadcast Television, Filmed Entertainment, and Theme Parks segments. The Cable Communications segment offers video, high-speed Internet, and voice services to residential and business customers under the XFINITY brand name. The Cable Networks segment operates national cable networks, which provide entertainment, news and information, and sports content; regional sports and news networks; international channels; and cable television production operations, as well as owns digital media properties. The Broadcast Television segment operates NBC and Telemundo broadcast networks. The Filmed Entertainment segment produces, acquires, markets, and distributes live-action and animated filmed entertainment under the Universal Pictures, Focus Features, and Illumination names. The Theme Parks segment operates theme parks; studios; Island of adventures; and a dining, retail, and entertainment complex.

Team Money Research Rating

Our investment philosophy is to focus on company fundamentals and identify stocks that are displaying strong business performance, that operate sustainably and that pay a decent, well-covered dividend.

We analyze each company relative to the other on the following criteria within each of our two main buckets:

Business Performance

  1. Return on equity
  2. Return on assets
  3. Operating margins
  4. Quarterly revenue growth
  5. Quarterly earnings growth

Sustainability/Dividends/Forecasts

  1. Debt-to-equity ratio
  2. Interest cover
  3. Dividend payout ratio
  4. Forward yield
  5. Annual EPS growth forecast

Once we have analyzed the two companies based on the first two buckets, we can then assess whether they represent good value based on the current prices of the two stocks. We use the following criteria to assess valuations on a relative basis.

Valuation

  1. Forward price to earnings ratio
  2. Price to book value ratio
  3. Enterprise value to EBITDA
  4. Price to 3 year average free cash flow ratio
  5. 5 year price to earnings growth ratio

So, for example, a company that performs well compared

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