Billionaire Stephen Mandel Likes Charter Communications

We can compare Charter to Comcast Corporation (NASDAQ:CMCSA), Verizon Communications Inc. (NYSE:VZ), Virgin Media Inc. (NASDAQ:VMED), and DISH Network Corp. (NASDAQ:DISH). All of these companies are valued at lower EBITDA multiples than Charter is (and generally are cheaper on an earnings basis as well). Virgin’s EV/EBITDA multiple if 7.5x, with the other three companies carrying enterprise values of less than 7 times their trailing EBITDA. Charter is well within the range formed by these companies when we look at recent revenue performance- Dish Network’s revenue was actually down in its most recent quarterly report versus a year earlier- but Comcast, certainly a very close peer, boasts not only the cheaper valuation we’ve discussed but also a double-digit percentage growth rate on the top line in the third quarter of 2012 from its levels in the same period in 2011. Comcast, of course, is also a much larger company with a market cap of about $100 billion.

As such we’re not sure why Lone Pine is so excited about Charter. Valuing it or similar companies from a P/E perspective is difficult, but even in terms of EBITDA the valuation appears if anything expensive relative to its peers. Charter does not make up for this pricing with superior business performance, and so we would suggest that investors who are interested in the industry look at other companies.

Disclosure: I own no shares of any stocks mentioned in this article.