Until now, zombies, meth magnates, and morally corrupt ad men had been the main profit divers at AMC. But Breaking Bad ended and Mad Men is going into its final season. Walking Dead, their zombie apocalypse juggernaut, the most-watched drama series in cable history, and The Killing are their remaining scripted winners. AMC Networks Inc (NASDAQ:AMCX) also owns WE tv, Sundance Channel, IFC, and IFC films.
Another strong competitor moving more to the reality show model is Scripps Networks Interactive, Inc. (NYSE:SNI) with reality based competition shows like Cutthroat Kitchen to debut August 11 and reality show, Catastrophe Inc.
Scripps Networks Interactive, Inc. (NYSE:SNI) owns lifestyle based HGTV, Travel Channel, Great American Country, Cooking Channel, DIY Network, and Food Network. It also publishes magazines and internet content and sells merchandise tied to the networks.
One advantage Scripps Networks Interactive, Inc. (NYSE:SNI) has is the loyalty and high disposable income of its viewers helping HGTV and Food Network to generate over 70% of revenues and delighting advertisers. HGTV and Food Network content is watched in 200 million US households but the company also has global ambitions having bought the Asian Food Network this year. International revenues almost doubled from $6.6 million to $11.8 million in Q1 reported in May.
The real(ity) competition
Scripps trades at a trailing P/E of 16.29 and offers a 0.80% yield at a 12% payout ratio. The PEG is 1.47. Discovery Communications Inc. (NASDAQ:DISCA) is trading at a trailing P/E of double Scripps’ at 33.20 but the PEG is lower at 1.14. AMC’s PEG shows it’s fairly valued at 1.03 and its trailing P/E is 31.94 with a forward P/E of 17.58.
Operating margins are good at these media companies with Scripps’ at 39.70%, Discovery’s at 40.81%, and AMC’s at 28.66%. As you can see from the margins the cost of scripted programming hits AMC.
Analysts expect similar five year EPS growth at Discovery Communications Inc. (NASDAQ:DISCA) and AMC with 22% and 20% respectively and only 13.58% for Scripps.
Who will jump the shark?
Scripps is the value name here, shareholder friendly with an affluent viewer base and global initiatives. Discovery is the growth name but it worries me with its high P/E although its sports programming and dominant position in non-fiction content should reassure current investors. AMC is looking promising despite its lower margin as it moves more into reality TV.
The article Has This Network Jumped the Shark? originally appeared on Fool.com and is written by AnnaLisa Kraft.
AnnaLisa Kraft has no position in any stocks mentioned. The Motley Fool recommends AMC Networks. AnnaLisa 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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