With Comcast (CMCSA) trading just off 52-week highs, I decided to take a closer into the company to see if there is any reason to be excited about the stock at these prices. Here are the six points I looked at while researching the company:
Valuation: Comcast's trailing 5 year valuation metrics suggest that the stock is fairly valued as two of metrics are above their respective 5 year average while one is below. Comcast's current P/B ratio is 1.5 and it has averaged 1.4 over the past 5 years with a high of 2.1 and low of 1.0. Comcast's current P/S ratio is 1.4 and it has averaged 1.7 over the past 5 years with a high of 3.0 and low of 1.1. Comcast's current P/E ratio is 18.7 and it has averaged 19.5 over the past 5 years with a high of 32.7 and low of 13.4.
Price Target: The consensus price target for the analysts who follow Comcast is $31. That is upside of 20% and suggests that the stock is fairly valued at these levels and has little upside from here.
Forward Valuation: Comcast is trading at about $26 a share with analysts expecting the company to report earnings of $1.88 a share next year for a forward P/E of 14. Revenues are expected to grow 8%. According to Yahoo Finance, publically traded competitors include DirecTV (DTV) and Dish Network (DISH). Dish is trading at $29 a share with analysts expecting the company to report earnings of $2.70 a share next year for a forward P/E of 11. Revenues are expected to rise 4%. DirecTV is trading at $44 a share with analysts expecting the company to report earnings of $4.38 per share in 2012 for a forward P/E of 10. Revenues are expected to rise 10%. This valuation metric suggests that Comcast is overvalued as it is trading at a premium multiple to its other publically traded competitors. According to the Dividend Kings Fair Value metric, the stock is being properly valued by the market as the website suggests that the stock is worth $25 a share versus its current $26 price.
Earnings Estimates: Comcast has had a mixed recent earnings history. The company beat earnings estimates just two of the past 4 quarters while having one in-line quarter and one miss. The earnings have been between 0-7 cents off of consensus estimates with three of them being between 0-2 cents. If the company is able to report earnings of more than 5 cents above consensus estimates, this should serve as a catalyst for the share price.
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Price Action: The stock was pretty boring for the first half of the year, trading between the $22 and $27 levels. However, the fun began at the end of July after the broader market came under pressure and the stock stumbled all the way to $19 a share in August. Since then, however, the stock has bounced back all the way to its current price of over $26 a share, trading just off 52 week highs. Comcast is currently above its 50 day moving average and its 200 day moving averages, which are at around $23 a share. The golden cross also just occurred where the 50 day moving average crosses the 200 day moving average. Support on the downside includes $25 a share followed by the $23.50-24.00 level. On the upside, the big resistance level should be the 52 week high of $27.16.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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