Scripps Networks Interactive, Inc. (SNI), Discovery Communications Inc. (DISCA), Sirius XM Radio Inc (SIRI): Traditional Media Still Offers Upside

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Although some might believe that traditional media is slowly dying, content creators have still got long pathways for growth ahead of them, especially those who are also exploring new platforms. Scripps Networks Interactive, Inc. (NYSE:SNI)Discovery Communications Inc. (NASDAQ:DISCA) and Sirius XM Radio Inc (NASDAQ:SIRI) are three companies that fulfill these requirements and thus, offer compelling long-term investment prospects. Let’s take a closer look at them.

Living the good life

Scripps Networks Interactive, Inc. (NYSE:SNI)

Scripps Networks Interactive, Inc. (NYSE:SNI) is a leading developer of lifestyle-oriented content for the Internet and TV. Its two most valuable assets, which account for about 60% of the firm´s revenue, are Food Network and Home & Garden Television. Having found a niche within the entertainment sector, the company has managed to generate impressive margins and returns, way above its peers.The key to this kind of profitability resides in its audience, which is not only targeted and loyal, but also counts with above average levels of disposable income; these characteristics have made Scripps’ media attractive options for advertisers.

As more companies, like Verizon Communications Inc. (NYSE:VZ) and AT&T Inc. (NYSE:T), enter the media market, bidders for its content multiply, and Scripps Networks Interactive, Inc. (NYSE:SNI)’ pricing power is bound to increase. This will help the firm further widen its already outstanding margins. In addition, its loyal audience provides the firm with the opportunity to further exploit non-TV verticals, including magazines, websites (and other internet-based platforms) and mobile channels. Finally, acquisitions will play an important role in revenue growth, as proven by the recent purchases of Travel Channel, Asian Food Channel, and a 50% stake in UKTV.

Trading at 15 times its earnings, slightly below its competitors’ mean valuation, while rewarding shareholders through dividends and share repurchases, and expected to deliver strong growth figures in the future, Scripps Networks Interactive, Inc. (NYSE:SNI) looks pretty attractive.

Discover Discovery

Discovery Communications Inc. (NASDAQ:DISCA) is a worldwide media company that produces and distributes original programming through diverse platforms. Its TV content and channels are recognized globally, and this established position in the market is what provides the firm with a moat to keep competitors at bay. Actually, one of its brands, Discovery Channel, is distributed in over 200 countries, more than any other brand in the world.

Discovery Communications Inc. (NASDAQ:DISCA) benefits from its brand name not only by holding considerable leverage over cable providers that pay fees for its content, but also by attracting plenty of advertisers. Moreover, since its content is less expensive to produce than many of its competitors’, the company’s margins are more than twice the industry average. Going forward, these costs will only decrease as its massive video library supplies plenty of material to use at low incremental cost (Morningstar).

While analysts expect the firm to benefit from the growth of both traditional and emerging distribution channels going forward, I also see great potential in acquisitions and partnerships. For example, the joint-venture with the Oprah Winfrey Network (OWN) is expected to deliver plenty of revenue for Discovery Communications Inc. (NASDAQ:DISCA).

But, with its shares trading well above industry averages (at almost double, actually), are these shares a buy? I’d say that for the long-term, they are. Expected to deliver an average annual EPS growth rate in the 22%-23% rate, outperforming its peers by about 37% in average, I believe that this company is worth the premium.

Radio days

Sirius XM Radio Inc (NASDAQ:SIRI) is the largest subscription radio broadcaster in the U.S., with over 23 million paying users. It holds a wide product offering that includes music, sports, news, talk, entertainment, traffic, and weather channels; about 100 different stations are broadcast through its proprietary satellite radio systems. Its scale allows it access to more streaming content, including expensive ones such as NFL matches.

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