Discovery Communications Inc. (DISCA), Scripps Networks Interactive, Inc. (SNI): TV Stocks to Watch Closely

Pretty popular

CBS Corporation (NYSE:CBS) is a mass-media conglomerate focused on the TV, radio and billboard businesses. CBS’s Television Studios and Television Network are the backbone of the company with a strong track record of generating hit TV-shows and holding industry-leading audience ratings for the past 10 years.

Its broadcast network reach and chart-topping ratings have made it extremely attractive to advertisers, who value CBS’ success and stability. Similar is the case for TV writers and producers, who see this popular network as a great place to launch their new shows.

Beyond advertising, the firm has developed several windows to monetize its popular programs after their original airing, which include strategic deals with fast-growing streaming companies (Netflix, Hulu, Amazon). This is currently benefiting CBS, as its first quarter results reported a strong double-digit growth in streaming revenue that boosted its bottom-line. In addition, I should point out a fact often overlooked: the firm is benefiting financially from the advance of pay-TV as it offers syndication rights to major cable networks (like TNT or TBS) for re-runs of its programming.

Having soared over 55% during the last year, CBS trades at $52 or 20 times its earnings, a premium to both the industry average and the S&P 500’s. Although the firm looks solid, I would wait for a more attractive entry point to become available before chipping in.

Bottom line

Although these three firms have been performing well lately, my long-term bet here is on Discovery. With solid international growth opportunities ahead, increasing domestic viewership ratings, and a strong track record of producing popular (yet inexpensive) TV content, this is a company worth considering if you fancy investing in the entertainment industry.

Victor Selva has no position in any stocks mentioned. The Motley Fool recommends Scripps Networks Interactive (NYSE:SNI).

The article 3 TV Stocks to Watch Closely originally appeared on Fool.com and is written by Victor Selva.

Victor is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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