Comcast Corporation (NASDAQ:CMCSA), easily DIRECTV’s largest competitor with its hefty $89.1 billion market cap, appears to be focused on the acquisition of content producers in order to facilitate growth. The company has completed its acquisition of NBC Universal, which gives the television titan control over NBC’s television network, Universal movie studio and Universal theme parks. The company’s large cash balance will allow it to continue investing in content and infrastructure, as well as return cash to shareholders in the form of buybacks and dividends. Still, the company isn’t growing earnings quite as fast as DIRECTV (NASDAQ:DTV) and saw a decline in subscribers over the last few years.
With the domestic market highly saturated and competition in the space fierce, DIRECTV is naturally looking towards its Latin American operations as a means to continue and expand its growth. So far, this is paying off. The region is currently good for about 25% of the company’s value, and the powerful annualized subscriber growth of around 25% here means this number could go a lot higher in the next few years. DirecTV now has around 10.3 million subscribers in Latin America and is looking to expand aggressively in the region.
Valuations and Metrics
Of the three TV companies discussed in this article, DIRECTV (NASDAQ:DTV) is by far the cheapest. The TTM PE is around 12.36x, easily lower than Comcast Corporation (NASDAQ:CMCSA)’s 18.41 and DISH Network Corp. (NASDAQ:DISH)’ 26.88. The same is true for the price to sales, at 1.1 versus 1.76 and 1.21. The PEG ratio of only 0.68 paints a similar picture. The company has an operating margin of 17%, which is pretty decent. The operating cash flow of around $5.63 billion is healthy, although the company has just over half its market cap in debt and only $1.9 billion in cash.
The Bottom Line
With a quickly changing industry, it is becoming increasingly hard for cable and satellite television providers to keep up. However, DIRECTV (NASDAQ:DTV) has been doing very well in terms of growing earnings and revenue as of late, with especially strong growth in its Latin American division. Analysts expect this high growth to keep up in the next few years. Additionally, the company is trading at a steep discount to the industry at the moment. I’m positive on the company’s prospects going forward.
The article Keeping Television Competitive originally appeared on Fool.com and is written by Daniel James.
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