High valuation, zero dividend
At around $102 per share, Charter Communications is worth more than $10.3 billion. The market values the company at 8.78 times EV/EBITDA.
Compared to its peers, including Comcast Corporation (NASDAQ:CMCSA) and Cablevision Systems Corporation (NYSE:CVC), Charter Communications carries the most expensive valuation. Comcast is trading around $40 per share, with a total market cap of $105.5 billion. It has the cheapest valuation at only 6.78 times EV/EBITDA. Cablevision, at $15 per share, has a total market cap of nearly $4 billion. The market values Cablevision at 7.6 times EV/EBITDA.
Interestingly, Comcast is the most profitable company among the three, with around a 19.5% operating margin, whereas the operating margin of Cablevision is 12.7%. Charter Communications, Inc. (NASDAQ:CHTR) has the smallest operating margin at 12.4%.
That said, I’m impressed by Charter’s chief. Former Cablevision CEO Tom Rutledge has headed Charter since late 2011. He was the man behind Charter’s recent purchase of Cablevision’s cable systems in the western states for $1.62 billion. With the deal, Charter will own some of the fastest-growing cable assets in the U.S.
In terms of dividend yield, Cablevision pays the highest yield at 4.1%, while Comcast’s dividend is only 1.9%. Charter Communications, Inc. (NASDAQ:CHTR) does not pay any dividends at the moment.
My Foolish take
Charter Communications, Inc. (NASDAQ:CHTR) will head toward brighter prospects under the leadership of Tom Rutledge. However, I would rather wait for more debt reduction to feel more comfortable initiating a long position in the company. In the meantime, Comcast is a good long-term play with the highest margin and lowest valuation.
The article Is John Malone’s Return to Cable a Bullish Sign? originally appeared on Fool.com and is written by Anh Hoang.
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