The Company You Hate Could be a Great Investment: Netflix, Inc. (NFLX), Comcast Corporation (CMCSA), CBS Corporation (CBS)

Impressive Growth, But They Can Do Better
Comcast’s growth in earnings has been nothing short of surprising. The company reportedadjusted EPS up 10.6%, and analysts are calling for better than 16% EPS growth going forward. Relatively speaking, Time Warner and CBS outperformed Comcast with 24.47% and 19% EPSgrowth in their respective quarters. Walt Disney lagged the industry with EPS down 1.25%, but this was due to difficult comparisons because of strength in their film division last year.

Part of the reason that Time Warner and CBS Corporation (NYSE:CBS) outperformed Comcast has to do with their respective operating margins. In the current quarter, both Time Warner and CBS Corporation (NYSE:CBS) reported operating margins of over 24%. By comparison, Comcast’s margin was 20.67%, which only beat out Walt Disney at 18.54%. However, Comcast’s previously mentioned acquisition ofNBCUniversal should help improve margins going forward.

One big challenge that Comcast will need to overcome is their relatively weak upcoming film release schedule for 2013. In 2012, Comcast had the benefit of Les Miserables and Pitch Perfect. This year, the “big” hits are Fast and Furious 6, Despicable Me 2, and Kick-Ass 2. While these films may do well, they will have a hard time competing with the huge releases due out from Time Warner’s Warner Bros. Studio and Walt Disney.

In 2013, Warner Bros. has arguably the strongest movie release list with names like The Hobbit, Man of Steel, and the 300 prequel. Disney also has a strong calendar with names like Monsters University, and sequels to Iron Man and Thor.

Still One Of The Best Values
Even with challenges in the film division, Comcast looks particularly attractive at current prices. The company yields almost 2% with their dividend increase, which is just less than Time Warner at 2.2%. Relatively speaking, CBS and Disney’s yields of 1.1% and 1.4% just can’t compete. When it comes to earnings growth, analysts expect Comcast to lead the industry at over 16%, compared to about 12% at Time Warner and CBS, and 11% at Disney. While Comcast does carry the highest P/E ratio at 16.7, this is still very close to their competition with forward P/E ratios between 14 and 15.7.

The article The Company You Hate Could be a Great Investment originally appeared on Fool.com and is written by Chad Henage.

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