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Annotated article summary from this weekend's Barron's. Receive all our Barron's summaries by signing up here:

John Malone's Best-Kept Secret by Neil A. Martin

Summary: While the reported earnings of cable giant Liberty Global (NASDAQ:LBTYA) may look bad (-$0.35/share in Q1 and an estimated -$0.84 on the year), its Ebitda [earnings before interest, taxes, depreciation and amortization] -- analysts' preferred measure of cable profitability -- have grown by 16% in each of the past two years amid cash-flow growth, market share increases, and share buybacks. Its negative EPS are reflective of high depreciation costs related to the company's acquisitions. At $42, shares are up almost 100% over the past year, and trade at 8.4x 2008e Ebitda -- about a point higher than the cable industry average. But Lehman's Vijay Jayant says they're worth it, due to the company's accelerated earnings growth. "[Liberty] is at an earlier stage in its development cycle, and has a commanding position in cable markets overseas that are not as mature or consolidated, and not nearly as competitive as those dominated by Comcast (NASDAQ:CMCSA) in the U.S.," says M&R Capital's John Maloney. Wall Street expects Liberty Global to generate $3.4B and $3.8B in Ebitda over the next two years, cash that will likely be used to snap up even more of its own shares, of which the company has repurchased 20% since the beginning of 2006. It is rumored to be mulling a bid for British cable company Virgin Media (NASDAQ:VMED), which could be used to bolster other European properties and offset future tax liabilities. But Barron's says at current prices, using its cash to buy back its shares -- which could hit $60 over the next 18 months -- is still its best option.

Related Links: Making Sense Of The Liberty EmpireNine Cable TV Stocks Worth WatchingLiberty Looks at Virgin Media Bid

Liberty Global 05 08 2007

Source: Don't Overlook Liberty Global's Great Cash Flow - Barron's