Discovery Communications Inc. (DISCA): Is There More To Discover?

The importance of this strategy is twofold; it lessens the company’s overall dependence on individual content properties and it allows management to better capitalize on the popular trends among viewers by inundating the market with similarly themed but still original shows. Most important is that the company has a long history of launching similarly themed shows off of successful predecessors and while it may be an easy formula to apply it is certainly difficult to master. Discovery seems to have done it and as long as there are new mysteries waiting to be unraveled in the world I see no end to Discovery’s ability to capture them on film and turn them into gripping television.

Discover the profits

The company’s unique ability to continuously generate new and compelling content has had an explosive effect on Discovery’s revenue and earnings-per-share growth over the last two years. Revenue grew 19.09% from fiscal 2010 to fiscal 2012, from $3.77 billion to $4.49 billion. EPS grew a staggering 70.74% in the same two years, from $1.47 per share in fiscal 2010 to $2.51 per share in fiscal 2012.

This impressive revenue and earnings-per-share growth has led to outsized returns for investors over the last two years. Shares of Discovery have returned 95% since September of 2009, which is nearly double the return of the S&P 500 index’s total return of 48.56%. Perhaps most important of all is that analysts’ forward-looking projections call for robust growth in 2013-2014. Revenue is expected to grow 18.05% on average over the next two years while EPS is expected to grow an even more impressive 26.9% on average.

What this means is that Discovery’s successful content creation is translating into solid revenue and earnings-per-share growth and even better returns for shareholders. With no shortage of new shows in the making, as the company has plans to air 14 completely new shows/events in 2013-2014 as well as feature 11 returning shows on its signature Discovery Channel alone, Discovery Communications seems poised to continue delivering consistent returns to investors going forward.

The article Discovery Communications: Is There More To Discover? originally appeared on Fool.com and is written by Philip Saglimbeni.

Philip Saglimbeni is long Discovery Communications. The Motley Fool recommends AMC Networks. 

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