CMCSA Stock Study (5-22-24)
Posted by Mark on June 24, 2024 at 06:50 | Last modified: May 22, 2024 11:36I recently did a stock study on Comcast Corp. (CMCSA) with a closing price of $39.21. Previous studies are here and here.
M* writes:
> Comcast is made up of three parts. The core cable business owns
> networks capable of providing television, internet access, and
> phone services to 63 million US homes and businesses, or nearly
> half of the country. About 55% of the locations in this territory
> subscribe to at least one Comcast service. Comcast acquired
> NBCUniversal from General Electric in 2011. NBCU owns several
> cable networks, including CNBC, MSNBC, and USA, the NBC network,
> the Peacock streaming platform, several local NBC affiliates,
> Universal Studios, and several theme parks. Sky, acquired in 2018,
> is the dominant television provider in the UK and has invested
> heavily in proprietary content to build this position. Sky is
> also the largest pay-television provider in Italy and has a
> presence in Germany and Austria.
Over the last 10 years, this mega-size (greater than $50B annual revenue) company has grown sales and earnings 7.0% and 10.0% per year, respectively (excluding upside EPS outlier in ’17 due to TCJA and downside outlier in ’22 due to goodwill impairment). Lines are mostly up, straight, and parallel except for sales/EPS decline in ’20.
Over the past decade, PTPM leads peer and industry averages despite decreasing from 18.1% (’14) to 16.8% (’23) with a last-5-year mean (excluding ’22) of 15.6%. ROE leads peer and industry averages since ’18 with a last-5-year mean (excluding ’22) of 15.2%. Debt-to-Capital is less than peer and industry averages despite increasing from 47.8% (’14) to 54.0% (’23) with a last-5-year mean of 50.3%.
Although Interest Coverage and Quick Ratio are only 6.0 and 0.5, respectively per M*, Value Line gives an “A+” rating for Financial Strength. M* gives a “Standard” rating for Capital Allocation, assigns a “Wide” economic moat, and writes:
> We believe the firm’s balance sheet is sound and shareholder
> returns are generally appropriate. The firm instituted a
> dividend in 2008 as the business started to generate strong
> cash flows and has increased its payout tenfold since then,
> or 15% annually on average.
With regard to sales growth:
- YF projects YOY 2.0% growth and 0.5% contraction for ’24 and ’25, respectively (based on 25 analysts).
- Zacks projects YOY 1.3% and flat growth for ’24 and ’25, respectively (6 analysts).
- Value Line projects 0.6% annualized growth from ’23-’28.
- CFRA projects growth of 2.2% YOY and 1.0% per year for ’24 and ’23-’25, respectively.
- M* offers a 2-year ACE of 0.2% growth per year.
I am forecasting flat growth below the long-term estimate.
With regard to EPS growth:
- MarketWatch projects 9.9% and 9.4% per year for ’23-’25 and ’23-’26, respectively (based on 30 analysts).
- Nasdaq.com projects 8.0% and 6.3% per year for ’24-’26 and ’24-’27 [8/4/1 analyst(s) for ’24/’26/’27].
- Seeking Alpha projects 4-year annualized growth of 9.3%.
- YF projects YOY 6.0% and 6.9% for ’24 and ’25 (24) along with 5-year annualized growth of 8.7%.
- Zacks projects YOY 5.8% and 6.1% for ’24 and ’25 (8) along with 5-year annualized growth of 9.5%.
- Value Line projects 7.4% annualized growth from ’23-’28.
- CFRA projects 6.5% YOY and 6.9% per year for ’24 and ’23-’25, along with a 3-year CAGR of 8.0%.
- M* gives a long-term ACE of 13.1% annualized growth.
My 7.0% forecast is below the long-term estimate range (mean of five: 9.6%). Initial value is 2023 EPS of $3.71/share.
My Forecast High P/E is 15.0. Over the past decade, high P/E ranges from 12.8 in ’23 to 23.0 in ’20 (8.9 in ’17 and 43.1 in ’22 excluded as outliers) with a last-5-year mean of 18.2. The last-5-year-mean average P/E is 15.4. I am forecasting toward the bottom of the range (only ’23 is lower).
My Forecast Low P/E is 8.0. Over the past decade, low P/E ranges from 9.3 in ’23 to 15.4 in ’15 (7.2 in ’17 and 23.5 in ’22 excluded as outliers) with a last-5-year mean of 12.6. I am forecasting below the range.
My Low Stock Price Forecast (LSPF) of $29.70 is default based on initial value given above. This is 24.3% less than the previous closing price and 18.7% less than the 52-week low.
The lowest Payout Ratio (PR) over the past decade is 28.1% in ’14 (excluding 13.3% outlier in ’17) and the last-5-year mean is 33.5% (excluding the upside outlier of 89.3% in ’22). I am forecasting below the range at 28.0%.
These inputs land CMCSA in the BUY zone with a U/D ratio of 4.1. Total Annualized Return (TAR) is 16.6%.
PAR (using Forecast Average—not High—P/E) is decent for a mega-size company at 11.3%. If a healthy margin of safety (MOS) anchors this study, then I can proceed based on TAR instead.
To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on 136 studies done in the past 90 days (my study and 50 outliers excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, Forecast Low P/E, and PR are 3.8%, 7.6%, 17.3, 11.1, and 38.8%, respectively. I am lower across the board. Value Line projects a future average annual P/E of 15.0 that is greater than MS (14.2) and greater than mine (11.5).
MS high / low EPS are $5.38/ $3.61 versus my $5.20 / $3.71 (per share). My high EPS is less due to a lower growth rate. Value Line’s high EPS of $5.70 is greater than both.
MS LSPF of $32.40 implies a Forecast Low P/E of 9.0 versus the above-stated 11.1. MS LSPF is 19.1% less than the default $3.61/share * 11.1 = $40.07 (INVALID on today’s date), which results in more conservative zoning. MS LSPF is still 9.1% greater than mine.
TAR (over 15.0% preferred) is less than MS 20.1%. I believe MOS to be robust in the current study.
With regard to valuation, PEG is 1.0 and 1.4 per Zacks and my projected P/E, respectively: fairly valued. Relative Value [(current P/E) / 5-year-mean average P/E] is cheap at 0.68.
CMCSA is a BUY under $41/share and the BetterInvesting TAR criterion is satisfied right now.