Feature Industry Review Media Entertainment

The Best Companies of the Media Entertainment Industry – October 2015

Best Companies of the Media Entertainment IndustryWhile ModernGraham supports the bottom-up approach to investing, many investors do utilize the top-down method, whereby an industry is selected before the company itself.  With that in mind, this article will take a brief look at the best companies of the auto industry, selecting the most promising investment opportunities within the industry, and giving a broad look into the industry as a whole.

Out of the more than 560 companies reviewed by ModernGraham, 15 were identified as being closely related to the auto industry.  Of those, only two are suitable for the Defensive Investor, two are suitable for the Enterprising Investor, and the remaining eleven are considered speculative at this time.  Excluding any extreme outliers, the average company was rated as being priced at 49.79% to its MG Value (estimated intrinsic value), with an average PEmg ratio of 17.91.  The industry as a whole, therefore would appear to be undervalued, particularly in comparison to the market (see Mr. Market’s Mental State).

The Elite

The following companies have been rated as undervalued and suitable for either the Defensive Investor or the Enterprising Investor:

CBS Corporation (CBS)

CBS Corporation qualifies for the Enterprising Investor but is not suitable for the more conservative Defensive Investor.  The Defensive Investor is concerned with the low current ratio, insufficient earnings growth or stability over the last ten years, and the high PB ratio.  The Enterprising Investor is only concerned with the level of debt relative to the net current assets.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from a loss of $1.23 in 2011 to an estimated gain of $3.53 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.84% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.  (See the full valuation)

Twenty-First Century Fox Inc (FOXA)

Twenty-First Century Fox Inc. qualifies for the both the Defensive Investor and the Enterprising Investor.  The Defensive Investor is only concerned with the insufficient earnings stability over the last ten years.  The Enterprising Investor is only concerned by the level of debt relative to the net current assets.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.58 in 2012 to an estimated $2.44 for 2016.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.68% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.  (See the full valuation)

Graham Holdings Co (GHC)

Graham Holdings Company qualifies for both the Defensive Investor and for the Enterprising Investor.  The Defensive Investor is only concerned with the inconsistent dividend history.  The Enterprising Investor has no initial concerns.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $18.06 in 2011 to an estimated $70.23 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.06% annual earnings loss over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.  (See the full valuation)

Scripps Networks Interactive, Inc. (SNI)

Scripps Networks Interactive qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, short dividend history, and the high PB ratio.  The Enterprising Investor is only initially concerned with the level of debt relative to the net current assets.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.82 in 2011 to an estimated $3.85 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.71% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.  (See the full valuation)

The Good

The following companies have been rated as fairly valued and suitable for either the Defensive Investor or the Enterprising Investor:

No companies met these criteria.

The Full List

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Clicking on the company name will take you to the company’s latest valuation.  For the investor type, a “D” indicates the company is suitable for the Defensive Investor, an “E” indicates the company is suitable for the Enterprising Investor, and an “S” indicates the company is considered speculative at this time.

Ticker Name with Link Investor Type Latest Valuation Date MG Value Recent Price Price as a percent of Value PEmg Ratio Div. Yield
AMCX AMC Networks Inc S 8/15/2015 $141.01 $71.21 50.50% 19.46 N/A
CBS CBS Corporation E 8/12/2015 $136.06 $44.36 32.60% 12.57 1.35%
CMCSA Comcast Corporation S 1/25/2015 $92.71 $62.18 67.07% 25.80 1.61%
CVC Cablevision Systems Corporation S 1/25/2015 $45.56 $32.55 71.44% 27.58 1.84%
DIS Walt Disney Co S 11/19/2014 $100.82 $113.49 112.57% 33.18 1.16%
DISCA Discovery Communications Inc. S 6/2/2015 $50.66 $29.29 57.82% 18.90 N/A
DISCK Discovery Communications Inc. S 6/2/2015 $50.66 $27.56 54.40% 17.78 N/A
DTV DIRECTV S 10/28/2014 $184.18 $0.00 0.00% 0.00 N/A
FOXA Twenty-First Century Fox Inc D 10/15/2015 $93.81 $30.23 32.22% 12.39 0.99%
GHC Graham Holdings Co D 9/21/2015 $2,703.98 $570.54 21.10% 8.12 N/A
NWSA News Corp S 11/4/2014 $0.00 $14.71 N/A N/A 1.36%
SNI Scripps Networks Interactive, Inc. E 9/9/2015 $148.20 $57.14 38.56% 14.84 1.61%
TWC Time Warner Cable Inc S 11/7/2014 $252.97 $185.20 73.21% 28.19 1.62%
TWX Time Warner Inc S 1/29/2015 $135.26 $73.35 54.23% 20.90 1.91%
VIAB Viacom, Inc. S 1/5/2015 $158.81 $49.74 31.32% 11.08 3.22%

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To view the MG Value and PEmg information,  you must be logged in as a premium member.  Clicking on the company name will take you to the company’s latest valuation.

For the investor type, a “D” indicates the company is suitable for the Defensive Investor, an “E” indicates the company is suitable for the Enterprising Investor, and an “S” indicates the company is considered speculative at this time.

Ticker Name with Link Investor Type Latest Valuation Date MG Value Recent Price Price as a percent of Value PEmg Ratio Div. Yield
AMCX AMC Networks Inc S 8/15/2015 $71.21 N/A
CBS CBS Corporation E 8/12/2015 $44.36 1.35%
CMCSA Comcast Corporation S 1/25/2015 $62.18 1.61%
CVC Cablevision Systems Corporation S 1/25/2015 $32.55 1.84%
DIS Walt Disney Co S 11/19/2014 $113.49 1.16%
DISCA Discovery Communications Inc. S 6/2/2015 $29.29 N/A
DISCK Discovery Communications Inc. S 6/2/2015 $27.56 N/A
DTV DIRECTV S 10/28/2014 $0.00 N/A
FOXA Twenty-First Century Fox Inc D 10/15/2015 $30.23 0.99%
GHC Graham Holdings Co D 9/21/2015 $570.54 N/A
NWSA News Corp S 11/4/2014 $14.71 1.36%
SNI Scripps Networks Interactive, Inc. E 9/9/2015 $57.14 1.61%
TWC Time Warner Cable Inc S 11/7/2014 $185.20 1.62%
TWX Time Warner Inc S 1/29/2015 $73.35 1.91%
VIAB Viacom, Inc. S 1/5/2015 $49.74 3.22%

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Disclaimer: 

The author held a very small long position in Walt Disney Company (DIS) but did not hold a position in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours. See my current holdings here.  This article is not investment advice and all readers are encouraged to speak to a registered investment adviser prior to making any investing decisions.  Please also read our full disclaimer.

 

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