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Comcast Corp. (CMCSA) is by far the ruling monarch of the CATV Systems industry group. There are four other peer companies that I rank and offer direction for below. Like at many behemoth companies, earnings growth at Comcast is starting to slow once again. Second and third-tier companies will most often outperform the older giants within an industry group. Surprise, the risk/reward ratio is also often superior for lower tier companies.

Within my analytical work, "reality" was, is and always will be, everything you need to profit. The mental games that investors play with this word, "reality," is unbelievable. Numbers and accurate data can be manipulated -- they have and will be forever. A simple valuation or chart is fact, and when you have honest and correct data, you can't lose. So a "reality check" is nothing but an analyst's attempt at the verification of data. The "reality" question is, does the valuation data correlate with the price per share or not? If it does, you will enjoy consistent annul profits forever. On the other hand, you will never be consistently profitable if you read all the distorted information and data that is published so freely today.

Comcast talks often about its financial plans and successes. In reality, the "talk" does not often measure up. I share my assessment of Comcast to help investors match their expectations to reality. In my practice, a reality check is similar to my process of comparative analytics. Companies either have clear valuation support for future price appreciation or they don't. Even though Comcast's price per share is hitting new highs, the data and information are sending us a warning. A pull back may not occur for a while, but I recommend being prepared to take profits.

Comcast reported a 29.7% increase in first-quarter earnings, helped by growth in the number of high-speed Internet subscribers and the strong performance of its NBC broadcast business. Revenue also jumped a healthy 22.7% to about $15 billion. This shot in the arm should have done some good things for the price per share, and it did. After all, that is what investors expect from a growing giant like Comcast.

However, my collection of data and my valuation calculations tell a very different story.

Comcast is currently selling for about $31, and that is a recent high. It pays a 2.09% dividend, which is not all that generous for a large company. It is not likely that investors will be rewarded with much upside price appreciation in the coming months.

Price History

Did you know that Comcast shares sold for over $34 in late 1999? The highest it reached in 2007 was $28 per share. The 2009 to date rally has tripled the price per share to $31. This is unacceptable price performance for me, and should be for you if you are a "buy and hold" investor. The 20-year chart below tells this story best. You may want to ponder this chart before taking new positions. It compares Comcast with the SPDR S&P 500 ETF (SPY). I use this ETF to provide an important perspective about a company that I am valuating. The first thing I look at is how Comcast tracks the index in bullish and bearish market time frames. The second is a statistical measure of percentage gain and loss during bullish and bearish market time frames. Trends are a very helpful tool when investing wisely.

Current Valuation of Comcast

Current Price:

$31.00

Target Price: (from the high)

plus 6% / minus 20+%

Trailing P/E

19.3

Forward P/E (fye 12/31/13)

14.3

PEG Ratio

1.23 -- good

Price to Sales:

1.43

Price to Book:

1.77

Dividend (yield)

2.09%

Valuation Divergence:

(minus) - 22%

Source: Raw data taken from Finviz.

Notes for the table above: Target price is calculated and produces a probable range of the current price over the coming one to three months. Valuation divergence is calculated and produces a plus or minus percent of price over the following one to three months after a given bullish or bearish inflection point.

Comments for the table above: These are not strong Valuations and Target Price Projections. When I do additional fundamental studies, the valuation does not improve. Projected earnings growth for Comcast will fall off modestly for a couple of years or more. My technical and consensus opinion analysis suggests that Comcast has done its job for the past few years and needs a rest. Investing in Comcast at this time, or even holding, definitely needs to be weighed against a possible pull back.

Click to enlarge images.

Earnings Graphic

Regarding the chart above, please note the following: The earnings per share remain well below the 2007 level. The P/E ratio is flat-to-down, which is a positive. The volume is diminishing over the years. These are not facts that support holding Comcast in your portfolio.

Financial Statements

I have reviewed the company's income statement and balance sheet. I do not find anything to take issue with. There are many other companies with financials that present a better outlook.

Technical Opinion

It is clear from the price charts above that there are some longer-term problems with Comcast. Technical indicators are in the early process of breaking down. This is my initial warning that prices will fall in the coming few months and perhaps beyond.

Rating of Four Industry Peers

Company Symbol

Rating & Direction: (ascending / status quo / descending)

DirecTV, Inc. (DTV)

Poor - Good - - descending

Viacom, Inc. (VIAB)

Good - - status quo

Time Warner Cable, Inc. (TWC)

Poor - Good - - descending

DISH Network Corp. (DISH)

Poor - - descending

My Ratings range from Excellent to Very Poor -- with Direction.

Market Status

I use several indices in my focus to identify the ongoing bullish and bearish inflection points. The New York Composite Index is well-represented by the ETF, SPDR S&P 500 SPY. The Nasdaq Composite Index is represented well by the ETF, PowerShares QQQ Trust (QQQ). In my work, the identification of bullish and bearish inflection points is of critical importance. Because this is so critical, I also emphasize and use market "breadth" indices. Breadth does not have a tracking ETF; therefore, it was necessary to create my own excel charts.

These two indices, backed up with "breadth," are the foundation for my technical analysis. An axiom for the general market says, "the direction (trend) of the general market has a 60% influence on security's profits or losses." The following two charts (long and short-term) include SPY, QQQ and two of the companies presented in this article. I hope you can understand why this analytic exercise is so important to my method of managing assets.

My general market opinion is that the fundamentals are over-valued, the technicals are over-bought, and the consensus opinion is way too bullish. I am currently a bear because my valuations are convincingly negative, and we are in a bearish cycle; it's just that simple!

Further support for my guidance for the general market can be read in my weekly Instablog article "Wednesday: General Market Update And Commentary."

Summary

Currently, the tables and charts above present a clear and not-so-positive account of these five companies and the overall market indicators. It is a fact that the stock market cycles endlessly -- both fundamentally and technically -- from bullish to bearish and then back to bullish again. Unfortunately, this is a pattern that most investors do not take advantage of or understand very well.

Within this present bearish time frame, there is nothing (longer-term) wrong with these companies. It is simply what happens when they turn bearish, and is just the on-going "cycling effect" of the way the stock market works. I hope you understand and will continue to follow my work/analytics. It won't be long before I can offer you a bullish and upbeat forecast once again.

I would remind you to take a few minutes to study my 10- and 20-year charts. When buying or selling, taking a longer-term view of a security's price history is often the difference between profits and losses!

Conclusion

I am bearish on both the world economies and the general market. My more recent Instablog postings are focused on securities that should currently not be held in your portfolio. I suggest that it is vitally important for you to understand that holding cash during questionable time frames in the marketplace is a much wiser choice than holding your present positions. I can assure you, this is definitely a "questionable" time frame!

Additional and ongoing support for some of these companies' current statuses will be posted this Saturday. My "Saturday Update" can be read weekly in my Instablog article.

Source: Comcast Valuation Suggests A Reality Check With A Warning