Which entertainment action is a better buy?
August 24, 2021
6 minutes to read
This story originally appeared on StockNews
The entertainment industry is growing rapidly, with increasing demand for digital entertainment content. Comcast Corporation (CMCSA) and Charter Communications, Inc. (CHTR) are well established players in the industry and both are expected to benefit from the growth of the industry. But which of these titles is the best buy now? Read on to find out.
Comcast Corporation (CMCSA) in Philadelphia, Pennsylvania, operates as a worldwide media and technology company. It operates through Cable Communications; Cable networks; Broadcast television; Filmed entertainment; Amusement park; and segments of the sky. By comparison, Charter Communications, Inc. (CHTR) in Stamford, Connecticut, operates as a broadband and cable connectivity company serving residential and commercial customers in the United States.
The entertainment industry has evolved rapidly over the past two years, with over-the-top (OTT) platforms replacing traditional entertainment media. The players in the sector are constantly investing in technologies to offer innovative content and improve their distribution models to remain relevant. The global entertainment and media market is expected to grow at a CAGR of 10.4% over the next nine years to approximately $ 6.71 billion by 2030. Therefore, the major entertainment stocks CMCSA and CHTR are expected to grow steadily.
CHTR stock has gained 32.3% in the past six months, while CMCSA has returned 12.1%. Additionally, CHTR’s 20.6% year-to-date gains compare to CMCSA’s 14.1% returns. In terms of last year’s performance, CMCSA is the big winner with gains of 38.8% versus 29.9% for CHTR.
But which stock is a better buy now? Let’s find out.
On August 18, CMCSA and ViacomCBS Inc. (VIAC) has formed a partnership to launch a new subscription video-on-demand (SVOD) service in more than 20 European territories, covering 90 million households. This partnership should accelerate the expansion of the business market and build a leading position in SVOD in Europe.
CHTR has also partnered with ViacomCBS. On July 15, CHTR and ViacomCBS announced full, multi-year distribution agreements for the continued distribution of ViacomCBS’s leading portfolio, in addition to the licensing of ViacomCBS’s suite of streaming services. The company expects that these agreements will enable CHTR to improve the experience of its customers while strengthening its strategic interests in the field of advanced advertising and the concept of aggregated video store with the addition of the applications of streaming.
Recent financial results
CMCSA’s revenue increased 20.4% year-on-year to $ 28.55 billion in the fiscal second quarter ended June 30. Its operating profit rose 18.5% from its value a year ago to $ 5.51 billion. Its adjusted net income was $ 3.94 billion, up 24.3% from the same period last year. The company’s adjusted EPS increased 21.7% year-over-year to $ 0.84.
CHTR’s total revenue grew 9.5% year-over-year to $ 12.80 billion in its fiscal second quarter ended June 30. Its net income increased 33.2% from its value a year ago to $ 1.02 billion, while its free cash flow from operating activities improved by 13. 3% year-on-year to $ 4.00 billion. The company’s EPS improved 45.7% year-over-year to $ 5.29.
Past and expected financial performance
CMCSA’s EBITDA and revenues have grown at CAGRs of 4% and 7.5%, respectively, over the past three years. Analysts expect CMCSA’s revenue to grow 11.3% in the current year and 6.5% next year. The company’s EPS is expected to grow 15.4% in the current quarter, 19.5% in the current year, and 21.8% in the next year. In addition, its EPS is expected to grow at a rate of 18.7% per year over the next five years.
In comparison, CHTR’s EBITDA and revenues have grown at CAGRs of 7.5% and 5.5%, respectively, over the past three years. Analysts expect the company’s revenue to grow 7.2% in the current quarter, 6.9% in the current year, and 5.6% in the current quarter. next year. The company’s EPS is expected to grow 44.6% in the current quarter, 38.3% in the current year and 40.9% in the next year. Additionally, CHTR’s BPA is expected to grow at a rate of 36.8% per year over the next five years.
CMCSA’s last 12 months income is 2.18 times that of CHTR. CMCSA is also more profitable, with gross profit and net profit margin of 66.81% and 11.44%, respectively, compared to 44.47% and 7.78% for CHTR.
In addition, CMCSA’s ROA and ROTC of 4.27% and 5.84%, respectively, compare to 4.20% and 5.29% of CHTR.
So, CMCSA is more profitable here.
In terms of advance VE / Sales, CHTR is currently trading at 4.64x, which is 31.5% higher than CMCSA, which is currently trading at 3.18x. Additionally, CHTR’s forward EV / EBITDA ratio of 11.82 is 9.8% higher than CMCSA’s 10.66.
So, CMCSA is relatively affordable here.
CMCSA has an overall rating of B, which is equivalent to Buying in our property POWR odds system. CHTR, on the other hand, has an overall rating of C, which translates to Neutral. POWR scores are calculated by considering 118 different factors, each factor being weighted to an optimal degree.
CMCSA has a B rating for sentiment. This favorable sentiment is justified because analysts expect the stock to be earn 13.1% over the next 12 months. CHTR, on the other hand, has a C rating for Sentiment. Analysts expect the share price to rise 4.4% in the short term, in accordance with the Sentiment note.
Of the nine actions of Entertainment – TV and Internet Providers industry, CMCSA is ranked # 1, while CHTR is ranked # 5.
Beyond what we’ve stated above, we’ve also rated stocks for Stability, Quality, Sentiment, and Growth. Click here to see the CMCSA dimensions. Also get all CHTR odds here.
The entertainment industry is expected to experience steady growth over an extended period, allowing entertainment companies CMCSA and CHTR to generate substantial returns. However, we believe its strong finances and higher profit margins make CMCSA the best buy here.
Our research shows that the chances of success increase when investing in stocks with an overall strong buy or buy rating. View All Top Rated Stocks in Entertainment – TV & Internet Providers here.
CMCSA shares were unchanged on Tuesday after trading hours. Year-to-date, CMCSA has gained 15.14%, compared to a 20.60% increase for the benchmark S&P 500 over the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After obtaining a master’s degree in economics, she acquired knowledge in equity research and portfolio management at Finlatics.
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